Traditional and alternative investment management strategies are beginning to converge, according to a new Keefe, Bruyette & Woods report.
We believe we are in the early stages of what, over the coming years, could be the growing convergence of alternative and traditional investment strategies and managers, the report noted.
Fortress Investment Groups IPO and AMVESCAPs purchase of buyout firm WL Ross last year are evidence of the convergence, as both types of managers could leverage existing investment capabilities and infrastructure, according to the report. In addition, traditional managers are developing alternative investment-type strategies such as collateralized debt obligations, 130/30 investments and currency management.
Challenges posed by the convergence include merging the different incentive fee and compensation structures, the report stated.