Alternative money managers are finding it harder to attract investments from new clients in the era of virtual meetings despite strong interest in their strategies as asset owners resume investing during the pandemic.
The problem, sources said, is the reluctance in most cases for institutional investors and managers to meet face-to-face given the global COVID-19 restrictions. Despite a much-improved facility by managers in presenting their investment strategies and providing information for due diligence checks via remote communication channels, industry observers said many asset owners still are not comfortable with a digital-only acquaintance.
"There's an abyss that asset owners have to jump over when it comes to getting to know potential investment managers for your fund via a Zoom meeting. There's a natural human-comfort factor that comes from meeting in person," said James Neumann, a New York-based partner and CIO of investment consultant Sussex Partners U.K. Ltd., London.
"There's a bias toward expanding relationships with existing managers because it's much harder to go from an initial call to hiring a new manager, especially in this environment," Mr. Neumann added.
Richard Nuzum, president of Mercer Investments LLC, New York, agreed. "It has been very difficult for managers to build new relationships during the pandemic. It's just so hard for investors to do basic due diligence," Mr. Nuzum said. "While it's tough to launch a new fund in a normal environment, it is close to impossible now. We've seen very few launches."
Mr. Neumann said the pace of investments "really slowed down between March and July as allocators were in a deer-in-the-headlights period as they tried to figure out what to do during the pandemic. There's a realization now that the fourth quarter is upon us and they have got to start investing again to be ready for 2021."
"Public pension funds in particular have to get it done and are taking action to make their investments," Mr. Neumann added.