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November 2021
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Global investors upbeat on alternatives, add ESG in decision-making, EY says

EY
By Hui Ching-hoo   
November 26, 2021

A majority of global investors have become more positive about alternatives in recent years thanks to strong returns from the asset class, and are also increasingly adding environmental, social and governance factors into these investments, according to survey findings by financial services consulting firm Ernst & Young.

EY polled 210 asset managers and 54 investors globally in the third quarter to gauge their views on alternatives and ESG investment trends.

According to the firm, 51% of investors said that the value delivered by alternative asset managers has improved in the last two to three years, and “overwhelmingly” indicated that alternative products either met or exceeded their return expectations.

And 46% of managers polled cited expansion of alternative products and strategies as one of their top strategic priorities.

“The positive shift in perception has been built on strong performance by alternative funds in the face of market and geopolitical uncertainties, as well as on managers being nimble and willing to customise product and strategy offerings,” EY says in a statement on November 24.

The survey “really highlights the resilience of the alternative funds industry and the key transformations that managers and investors are working together to effect”, according to Elliott Shadforth, EY Asia Pacific wealth and asset management leader.

“Both globally and regionally, alternative fund returns were relatively strong throughout 2021, even as fund managers and investors addressed ongoing challenges posed by the Covid-19 pandemic,” he says in the statement.

Alternatives investors are also placing greater importance on sustainability by increasingly incorporating ESG factors into their investment decisions.

Three-quarters of investors said they had stepped up scrutiny of managers’ sustainability policies in recent years, and 39% either declined to invest with a manager because of insufficient ESG adoption, or required the manager to make “meaningful improvements” to their ESG policies.

As for digital assets, EY says current exposure to cryptocurrency among most managers remains, small and only one in four expect to raise their allocation in the coming year.