Alternative Investment in 2023: new challenges, new skills, new talents

Alternative investment, a financing technique for all asset classes (debt, real estate, infrastructure, etc.), is facing new paradigm.

At a press breakfast on February 2^nd, Diane Segalen, Emma Galatry and Jeanne Segalen shed some light on the deep changes already in motion, through an analysis of the recruitment dynamics amongst the market’s main players.

SEGALEN+ASSOCIÉS has identified 4 key trends:

A segmentation of the sector with the emergence of new asset classes

Inflation, the Ukraine crisis, economic instabilities, the market upheaval has generated a strong race for funds to differentiate themselves in recent months. Private investment is segmenting itself into asset classes, such as growth equity, real assets, private debt and impact – which is becoming more popular to investors in search for meaningful ESG investments.

A multitude of new investment vehicles are emerging, reflecting a major strategic and cultural shift in the private investment industry, such as holding companies, long-term evergreen strategies, family offices, specialized niche funds or continuation funds.

An internalization of previously outsourced functions

Funds, which have become multi-strategy players, were mainly composed of investment professionals and now have structured “corporate” functions.

Human resources, executive portfolio management, investor relations, financing, marketing and communications teams : funds are all seeking to become more sophisticated by recruiting new profiles and hiring sector and business-specific experts (operating partners, senior advisors, digital specialists, CSR managers, etc.)

• Since 2019, a significant increase occurred in the recruitment of operational teams, with more than 50% of funds introducing Operating Partner profiles to their teams.*
• In 2022, the Talent Acquisition/Management function was present in more than 60% of investment funds.*
• In the same year, the Senior Advisor function was present in 90% of investment funds.*

* Sample of 30 Mid-Large Cap EU+US investment funds

A decentralization at the local level, particularly in France

International funds are moving more and more towards decentralization and developing their local presence at pan-European level. A way to better adapt to the mosaic of markets and cultures, and to increase their visibility and credibility towards potential acquisition targets and investors.

This trend is especially strong in Paris, which is becoming increasingly attractive: more than 10 funds (from a sample of 30 EU + US mid-large cap funds) have set up a local office over the past 5 years.

A prioritisation to Gender diverse recruitments

Finally, despite a persistent gender imbalance, the drive for gender parity within private equity has intensified since 2020, becoming the focus for new recruitments.

While the recruitment of women in the industry has tripled in two years (2019-2021), recruiting female profiles at Director and Partner levels remains a challenge. The career development and retention of women within funds is a major HR challenge for the future.

• On average, amongst the funds selected*, 34% of the investment team members are women.
• Between 2018-2022, 47% of recruits were women, which reflects the focus on gender diversity.
• Over the same period, 55% of female hires were at junior levels, predominantly Associate.

*Sample of ten UK/US/FR large cap funds with a strong presence in France

Outlook for the next 18-24 months…

Given the economic context and the reduced availability of the debt financing, the next few months will be decisive for the private investment industry. SEGALEN+ASSOCIÉS anticipates various changes:

• Consolidation or extinction of weaker players, that will face a “natural selection” in the market. The most performing players will be the only ones able to raise new funds.
• Movement in the teams: as fundraising will take longer and be below target, players whose portfolio’s underperform, will have to let go of some of their employees to adjust their team size to the amount of funds under management.
• Tougher departure conditions to retain talent.
• New recruitment challenges for head-hunters, who will have to adapt to the changing mindset of younger and more selective candidates that are less inclined to “sacrifice” the work-life balance over the long term while aspiring to build significant wealth.