Alternatives, Technology and ESG Over the Long Road Ahead

The private markets faced uncertainty at the start of the COVID-19 pandemic in Q1 2020. As portfolio companies were reviewed, playbooks rewritten and new strategies revised, the subsequent recovery shows the market’s resilience and points to more opportunity for limited partners (LPs) and general partners (GPs) alike.

During the recent SS&C Intralinks Alternative Investments Global Virtual Summit 2021, we put together a panel of veterans of the field — Anne Casscells, co-founder & chief investment officer at Aetos Alternatives Management; Lauren Dillard, executive vice president, investment intelligence at Nasdaq; and Angela Miller-May, chief investment officer at Illinois Municipal Retirement Fund — to discuss the current market and volatility.

Moderated by Elizabeth Lim, global market intelligence Manager at SS&C Intralinks, the panelists delved into a host of other pertinent topics, including the growing role that technology occupies in the industry and how new focuses on environmental, social and corporate governance (ESG) metrics are influencing decisions by LPs and GPs.

Buckle up: turbulence ahead

All three participants felt that we’re going to live with volatility for quite a while and that stakeholders need to"get comfortable with being uncomfortable,” as Angela put it. She shared her belief that"... increasing volatility is really going to be the norm.” Her daily experience has been as if "I took my eyes away for one minute and like the world kind of blew up — and that's been going on like [that] every day."

But even with daily disruption and potential corrections coming down the pike, the panelists felt that investors were going to ride the bumps and pivot as often as needed. Speaking from the Nasdaq perspective, Lauren explained, “Nothing that we see shows people moving out. I think the question is, where are they moving into?”

Anne added that it’s also a question of timing and focus. "The thing about alternatives," she said,"is you just can't do them tactically. It's just always really important to keep the relevant time frame in mind. Do the slow things slowly and… only put your short-term energy into things that can actually be implemented." 

Tech’s increased role 

The panelists were also unanimous in their belief that technology is playing — and will continue to play — a greater role across the industry. Lauren has found that, overall, portfolios are getting more complex. Across her organization, the consensus is that asset-owners always need faster and more consistent data. It’s important for them to be able to look at their portfolios in new and different ways across full-time asset classes.

Angela agreed and pointed out that growing reliance on technology was always a foregone conclusion, but events of the past two years have accelerated the transition."I think we were already on our way to this world, but I think the pandemic kind of forced us to get there in a more expedient way." 

Meanwhile, Anne cautioned that all this new technology, while certainly helping decision-makers and uncovering opportunities, should never be seen as a replacement for human insight."Technology is not a substitute for thought," she added.

ESG’s impact on investment strategies

The last few minutes of the discussion focused on the influence that ESG has had on investment strategies. As one of those investors, Angela shared that ESG is now a big ​​part of their organization’s due diligence processes. “ESG, for us, is really just another tool that provides more information on the sustainability of a manager’s strategy. … we invest more than 23 percent  — or  USD 12 billion — with minority women and persons with disability-owned firms."

Anne added that ESG is more than simply opening the tent — there are strategic benefits and greater insights that come from a focus on ESG."A diverse set of voices at the table just improves the information that we're able to pick up and share," she said.

From Lauren’s seat at Nasdaq, she can see that ESG focuses have been gaining real steam in recent years."We have seen in the last year, some sort of ESG criteria on the searches double. So it gives you a sense that when people are thinking about their investment criteria… [they] are incorporating it into their investment research."

Watch the keynote conversation below.