Priority Gaps Between Management and Investors Are Shrinking, EY Says

Ernst & Young (EY) has just completed its survey of alternative investment fund managers, and the results in some areas may be surprising. According to the survey, investors and managers have seen a greater convergence over the past year in how they view key issues such as talent management and environmental, social, and governance (ESG) initiatives.

The survey was conducted via interviews through the firm Greenwich Associates and included responses from hedge fund managers, private equity managers, and institutional investors. Of the 210 managers surveyed, approximately half worked at hedge funds, while the other half worked in private equity. An additional 54 interviews were conducted with institutional investors. Ernst & Young also provided data that compared this year’s responses to last year’s responses.

In 2020, 11% of managers ranked talent management as their No. 1 priority, in comparison to just 19% of investors. This year, perhaps due to a greater national awareness of the importance of diversity, a whopping 37% percent of managers listed talent management as their top priority, more than three times the value for the previous year. However, investors did not seem to change their positions nearly as dramatically, with 20% saying it was their No. 1 priority this year, a 1 percentage point increase from 2020.

“Investors seem to be moving in the same direction as managers,” said Natalie Deak Jaros, EY Americas Wealth & Asset Management (WAM) co-leader and WAM assurance leader. She says that one of the things that surprised her the most about this survey was how quickly certain trends seemed to take hold. “I think particularly on the talent front, if you look at trends like, for example, a hybrid way of working, more than half of the alternative industry said they would prioritize offering this as a way forward.”

She said she believes that had the firm asked the same question two or three years ago, less than 10% of managers and investors would have said the same thing.

Gaps between managers and investors appear to be growing smaller on other issues as well. Eleven percent of managers stated that ESG initiatives were their No. 1 priority compared with just 3% saying the same thing last year. This brings them closer in line with investors, of whom 17% said it was a top priority in 2020 and 22% said it was a No. 1 priority in 2021.

For institutional investors looking to put money into alternatives, this news bodes well since it means they will be more likely to find organizations in line with their ESG and diversity values. Nevertheless, managers and investors have a ways to go before they completely converge in regard to their priorities.