Broader trends

Priorities

Alternative fund managers prioritized growth and innovation while investors are demanding operational modernization.

Alternative fund managers are leaning into AI for alpha generation and product expansion — while investors expect it to drive efficiencies in cost, reporting, and middle- and back-office modernization, revealing a misalignment in
strategic priorities.

Investors demand for more efficient alternative fund managers:

16%

want tech/process upgrades in 2025 (vs. 2% in 2024)

20%

want managers to have streamlined investor reporting and greater transparency

But alternative fund managers continue to pursue growth:

31%

see accessing private client capital as the top strategic priority

Broader trends

Priorities

Strategic implications

Alternative fund managers:

Reframe strategic priorities to align with investor expectations.
Invest in operational infrastructure to support transparency and scale.
Use AI and automation to decouple headcount from growth.

Alternative fund managers strategic priorities
What are your top three strategic priorities in the next two years? Select your top three.

Source: 2025 Aaru Lumen Alternative Fund Survey Simulation Q8 alternative fund managers

Institutional investors:

Push for modernization as a core due diligence metric.
Prioritize partnerships with managers demonstrating operational maturity.
Influence strategic alignment through mandate design.

Institutional investors top strategic areas of focus
Assuming asset levels are stable (or growing) and performance meets expectations, in which of the following areas should managers be strategically focused to positively benefit investors? Rank your top three items below.

Source: 2025 Aaru Lumen Alternative Fund Survey Simulation Q13 Institutional Investors

Broader trends

Costs

In 2024, fee pressure was rising. In 2025, it’s reshaping operating models.

Institutional investors are enforcing cost discipline while managers face rising service demands — driving a shift toward scalable, tech-enabled delivery.

76%

of institutional investors are applying pressure on
management fees

58%

of institutional investors are applying pressure on incentive fees

Institutional investors are demanding leaner, more transparent cost structures, with zero tolerance for non-investment overhead. Alternative fund managers are responding by rethinking operating models to deliver scalable, tech-enabled service that meets rising expectations without inflating cost.

Institutional investors are applying pressure on alternative fund mangers to reduce management fees
To what degree are you placing pressure on alternatives fund managers or general partners to reduce their management fees?

Broader trends

Costs

Strategic implications

Alternative fund managers:

Modernize cost structures through automation, outsourcing and operating model redesign.
Deliver institutional-grade service at lower marginal cost.
Reassess product pricing and expense allocation.

Source: 2025 Aaru Lumen Alternative Fund Survey Simulation Q30 Institutional Investors

Institutional investors:

Demand transparency and cost discipline.
Evaluate manager readiness for scalable service delivery.
Use fee pressure as leverage for operational transformation.

Institutional investors are applying pressure on alternative fund managers to reduce incentive fees
To what degree are you placing pressure on alternatives fund managers or general partners to reduce their incentive fees?

Source: 2025 Aaru Lumen Alternative Fund Survey Simulation Q31 Institutional Investors