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KPMG's Global Alternative Investment Practice FINANCIAL SERVICES KPMG’s Global Alternative Investment practice kpmg.com/investmentmanagement KPMG INTERNATIONAL 2 KPMG’s Global Alternative Investment practice The growth of the alternative investment industry Investors are increasingly looking to investment management industry provide fund managers with the clarity alternative investments since they since the 2008 financial crisis. and confidence to succeed. We have offer the potential for enhanced more than 800 partners and 10,000 At KPMG, our Global Alternative return from a broader, non-traditional professionals serving alternative Investment practice is focused on investment approach while reducing investment clients in 60 major fund hedge funds, real estate funds, private overall portfolio risk. The latest centers globally, complemented equity funds and infrastructure funds. estimates on global assets under by KPMG’s audit, tax and advisory Our member firms combine their management (AUM) confirm the services and network of member firms depth of local knowledge with our steady re-emergence of the alternative across the globe. global cross-border experience to © 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. KPMG’s Global Alternative Investment practice 3 Shifts in the industry landscape Growing demand for as they look to reduce volatility and • Internally, fund managers encounter diversification manage downside risk in their investors’ a range of challenges, from a portfolios. Alternative investments weak knowledge base among The ongoing low rate environment provide diversification by investment their salesforce (sparking a need has investors considering alternative strategy, portfolio manager, industry for education and training), to investments to provide diversification sector, geography and liquidity needs. reputational risk, budget constraints and to optimize the risk adjusted and operational complexity. performance of their portfolios. Advisors • Heightened regulation has increased are interested in alternative investments Expanding investor group the barriers to entry into the alternative investment management Institutional and ultra-high net worth market and elevated operating costs. investors have become the core Having now assessed the many customer for alternative investments complexities that recent regulatory and demand is expected to continue to changes, such as the Alternative rise. While not always a major portion Investment Fund Managers Directive of their portfolio, pension funds and (AIFMD), have brought to the industry, insurance companies have increased fund managers have uncovered their overall allocations to alternative issues that require addressing. These investments. Historically, there have include changes to systems and been high net worth alternative distribution, communications and investors. However to grow this reporting, among others. segment, managers need to meet the • Cost management is one of the few higher expectations of these investors, controllable profit drivers and it often requiring an investment in distribution includes product rationalization, tax strategies and more investor and optimization, shared services and advisor education. outsourcing. Optimizing for growth The importance of data Although growing AUM and net and analytics new inflow figures are encouraging, alternative investment fund managers With the immense and growing face a number of challenges, which amount of data that is now available, have put more focus on achieving an there is an opportunity to utilize and optimal business and operational model build value for the funds. Better to meet financial goals. business decisions are dependent on gathering, analyzing and interpreting • Investors are demanding increased data. New requirements and reporting transparency, which means more needs rely on data architecture, quality frequent and enhanced reporting, data and strong data governance. Data with greater access to information can support product strategies and delivered across multiple channels. assist with predictive capabilities. At Increasing scrutiny on fees has the same time, the threat of cyber- led fund managers to focus on attacks demands prioritization of data developing efficient operations. privacy and protection. © 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 4 KPMG’s Global Alternative Investment practice Our member firms combine their depth of local knowledge with the cross-border experience of our global network to deliver practical, effective and insightful advice across a range of alternative investments funds. We serve four primary fund categories: Hedge funds With the objective of providing and practical advice that helps clients transparency, institutional robustness investors with uncorrelated returns enhance value and investment returns. and enhanced risk management. This and robust risk management, hedge creates organizational, operational KPMG professionals have the fund managers are being challenged and technological challenges for credentials and practical insight to help to deliver consistent performance. hedge funds that raise the costs and clients seize opportunities and overcome KPMG member firms work with a complexity of managing and growing the obstacles they face throughout broad mix of industry participants, an asset management business. the fund lifecycle, from market entry including managers and their funds, Our professionals understand that and start up, to ongoing business investors, administrators, custodians, approaches to hedge fund management performance, through to exit strategy. prime brokers and regulators across vary from one jurisdiction to the next the hedge fund sector to deliver clear Increasingly hedge fund investors and they can help deliver clear, practical and regulators are demanding greater guidance to a global industry. Real estate funds As a result of improving economic Real estate investors have become political and operational complexities of growth and favorable policies, real more pro-active since the financial competing in these markets is critically estate investments have emerged as crisis, and they expect more detailed important. With various investment a preferred option for investors on a and frequent reporting. KPMG’s global vehicles offering different degrees of global hunt for secure income streams. network of real estate professionals risk and returns, KPMG’s real estate Real estate investments have also serves all segments of the real estate professionals can help real estate fund evolved since the rise of real estate industry including REITs, real estate managers meet a long list of challenges investment trusts (REITs) as a source operating and service companies, including identifying market place of liquidity in the real estate market. lenders and intermediaries, and opportunities, clarifying for investors New sections of the market are now institutional investors and advisors. and developers alike the complexity being monetized and securitized, and in loan structures, and helping to As investors turn to emerging markets are proving popular with investors who understand the relevant regulatory and for higher returns and new investment seek risk diversification and long term tax environments. opportunities, developing a better capital growth. understanding of the cultural, legal, Private equity funds With an ever more competitive merger potential. Once purchased, private and strategic perspectives. Once the and acquisition (M&A) market, private equity firms have to ensure they deal is done, we apply our knowledge equity firms recognize the challenge have the right strategies, skillsets and discipline to work with the private of finding attractive opportunities and networks to deliver effective equity house and management team at realistic valuations. Additionally, intervention during their period of to deliver performance improvement. they are under intense pressure to ownership. Ultimately success is measured by deliver enhanced performance and the last stage in the value creation KPMG’s global network of specialist value in what is likely to be a period process – effectively realizing the value private equity professionals of modest macro-economic growth. created. KPMG member firms can leverage our deep industry and Fund managers therefore require a help clients ensure assets are well sector knowledge to assist clients better understanding of the targets presented to the market, realizing value in thoroughly understanding target pre-acquisition to reduce risk and fully and reducing process risk. companies from financial, operational understand the profit enhancement © 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. KPMG’s Global Alternative Investment practice 5 © 2015 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. 6 KPMG’s Global Alternative Investment practice Infrastructure funds As an alternative asset class, As infrastructure increases in KPMG’s Global Infrastructure
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