Mega alternative investment managers' ever-expanding roster of client types comes at a time when overall alternative investment fundraising has slowed as a result of the pandemic, but has not reduced the percentage of capital committed to the largest funds.
Despite the slowdown, the largest managers continue to get bigger. The percentage of capital raised by the largest managers in the first half of 2020 increased.
In real estate alone, megamanagers accumulated 75% of the total capital raised in the second quarter and 45% of the aggregate capital raised in the six months ended June 30, Preqin data shows.
The pandemic is proving to benefit megamanagers' accumulation of assets at the risk of newer and smaller managers, said David Conrod, co-founder and CEO of placement agent firm FocusPoint International Inc.
Managers with existing limited partner relationships are getting capital commitments, he said.
It's harder to raise capital with new limited partners during the current pandemic, he said.
"Creating new relationships without seeing people in person will take longer," Mr. Conrod said.
Meanwhile, investors see their managers seeking capital from new sources.
"Selling alternative products to retail investors, whether in the defined contribution market, or direct to retail, is viewed to be the Holy Grail for alternative investment firms reliant on institutional capital," said David Fann, vice chairman of alternative investment consultant Aksia LLC.
Institutional investors are not surprised by managers' expansion into retail and insurance company acquisition. "Over the past several years, many institutional LPs have been conditioned that the large platforms are diversifying their platforms," Mr. Fann said. Institutional investors, however, focus on long-term risk-adjusted returns.
The "litmus test" for investors are the managers' returns and the investment team's alignment of interest, Mr. Fann said.
"So long as there is no degradation in investment performance, most LPs will be unwavering," he said.