Wheelhouse Advisors explores the importance of digitisation in the alternative investment sector and how this will shape the industry in the short to medium term.

The ripple effect of the digital change that has occurred as a consequence of the uncertainty of the last two years has lead, among other things, to the alternative investment sector being on the cusp of its new transformative era.  Whilst the alternative investment is no stranger to technology, the sector is ripe for disruption as digitisation becomes the key driver for the industry. We are in the new era of Alternative Investments.

Digitisation Trend Drivers

According to a report published by KMPG, in this new wave of digitisation, data is the lifeblood. We are living in a climate whereby what the internet did to music, digitisation will do to finance. It is no longer a question of ‘if’ but ‘when’. Thanks to digital technologies, the financial sector is being revolutionised. Artificial intelligence, robotics, digitised data sets and faster processing are all pushing the alternative funds industry towards greater growth.

At the same time the pandemic accelerated this digital revolution, forcing companies to increase the pace of their respective digital strategies to be able to efficiently and effectively respond to the demand for real-time financial data to carry out their day-to-day business.

Process automation to business transformation

Until now, most alternative investment managers have been investing in digital technologies in order to reduce their operational costs through the automation of processes. In the last decade towards the point we are at today, the buzzword around the industry was ‘automation’ and the industry was asking whether robotics will be ‘taking human jobs’. However, it is no longer enough to be talking about or strategizing for ‘process automation’, companies must be reviewing digital as a means for business transformation.  Pre-pandemic, strategies for transformation would be placed on a timeline of between five to eight years. Now, firms are scrambling to accelerate these timelines.

The digitisation of the alternative investments sector will require firms to strategically invest in digital tools in order to speed up their transformation period. Companies that achieve this will be the ones that are leading the sector tomorrow. We will see the industry move from being product-centric to being client-centric. Essentially, the purpose of digitisation is not only to make the existing processes within a company more efficient, but they should also unlock new potential for value to give to clients.

A vision for the future

In order to thrive in the new market, firms will need to be working to build their own internalised systems and use cloud as a foundation for their digital transformation. However, leading firms within the hedge fund and private equity space understand and acknowledge that building their digitisation future will require more than just financial investment, they will need a vision for the future, building a holistic roadmap in how to get there, viewing technology and digital as the enablers for their future growth.