The alternative assets industry has evolved over time to include a multitude of different industry participants: investors, fund managers, investment consultants, and a range of other service providers. Key industry players include:
- Asset Owners/Institutional Investors/Limited Partners
Asset owners are the source of capital for investment in alternative assets. Below you will find definitions for some key investor types within alternative assets:
Asset owners make capital commitments to funds, undertaking due diligence to determine which fund managers to invest with. This can be an extensive process, with many stages including quantitative and qualitative due diligence, an assessment of fund manager performance track record and legal due diligence.
- Asset Managers/Fund Managers
Asset/fund managers are responsible for investing and managing asset owners’ capital. A portion of invested money will belong to the manager, but the majority belongs to investors. The managers generate fees from investors in the form of a management fee and a performance fee that rewards them for strong performance. We cover fees in more detail during a later lesson called 'Private Capital Fund Terms
- Investment Consultants/Gatekeepers
Investment consultants assist asset owners with the management and planning of their investment portfolio and provide investment recommendations. They charge a fee which is often not linked to the profits generated by their recommendations.
Technically, investment consultants are service providers; however, in some circumstances, they can decide where to invest an asset owner’s money. For this reason, they are often referred to as ‘gatekeepers’ and are key to securing capital for many asset managers.
‘Service provider’ is the collective term used to describe the parties that provide services to a fund. The main types of service providers include: