By: Chloe Swierzbinski
Sr. Manager, Product Marketing
February 24, 2025
“The easiest thing to do is to do what someone else has done before.” – Panelist
Institutional investors have historically favored large, established funds—particularly in uncertain economic climates. According to McKinsey’s Global Private Markets Report 2024, fundraising has become more concentrated, with the top 25 fundraisers capturing 41% of aggregate commitments, making it increasingly difficult for emerging managers to attract capital.
Yet, despite these trends, a different story emerged at the For The Long Term (FTLT) Emerging Manager Forum hosted in New York City. Key institutional decision-makers—those responsible for managing billions in pension fund assets and setting investment strategies for state and municipal funds—are not shying away from emerging managers. Instead, they are actively increasing allocations and working to formalize programs that ensure continued investment in this space.
A commitment to diverse and emerging managers
The event consisted of three panels, bringing together state treasurers, comptrollers, CIOs, and investment officers who oversee significant pools of institutional capital and are responsible for delivering long-term returns for pensioners, retirees, and beneficiaries. Across discussions, there was broad consensus: diverse, woman-owned, veteran, and disabled (MWVD) asset managers and emerging managers play an important role in institutional investment strategies and investors will continue to grow allocations —despite political shifts and macroeconomic uncertainty.
Panelists were at different stages of their journey toward expanding allocations to diverse and emerging managers. Some have well-established programs that have already scaled successfully, demonstrating strong returns and reinforcing the business case for continued investment. Others are still in the early stages, working through internal processes to integrate emerging managers into their broader investment approach.
Why institutional investors are prioritizing emerging managers
Emerging managers—defined as firms with fewer than four funds—bring distinct advantages to institutional portfolios:
- They fill niche investment gaps. Many emerging managers operate in specialized markets that larger firms overlook.
- They move with agility. Unlike larger firms, emerging managers can pivot quickly, take advantage of inefficiencies, and execute strategies with flexibility.
- They have the potential to generate outsized returns. Panelists reiterated that the proof is in the data—diverse and emerging managers deliver strong performance.
- They are more likely to work with LP needs. Emerging managers tend to be more flexible on fees, open to custom mandates, and highly engaged with investors.
- They align with long-term institutional priorities. As investors prioritize sustainability, diversity, and impact investing more, emerging managers play a key role in helping institutions meet these objectives while also delivering strong financial returns.
- They provide an opportunity for early access. Institutional investors who build relationships with top-performing emerging managers can establish strong partnerships early, secure better economics, and gain access to unique opportunities.
While emerging managers may not have the decades-long track records of their larger counterparts, investors aren’t looking at them through a short-term lens. They’re investing in long-term potential. For emerging managers, that means demonstrating institutional-quality operations, leveraging technology to scale efficiently, and delivering transparency to inspire confidence among LPs.
The real challenge? Institutional inertia, not emerging managers
Contrary to common belief, panelists pushed back on the idea that investing in emerging managers is difficult. The challenge isn’t the managers—it’s the industry’s inertia. It’s educating stakeholders and leveraging data to demonstrate higher returns.
For many institutions, the path of least resistance is to invest in large, well-known firms with long track records. Following precedent is easier than justifying new, smaller allocations—even when the data supports the business case for emerging managers.
Another challenge? Access to real-time, transparent data. Investors need clear performance metrics to justify allocations, assess risk, and track emerging managers over time. Without the right data infrastructure, reporting capabilities, and portfolio insights, securing and maintaining institutional capital can be an uphill battle.
What institutional investors are looking for
While institutional investors at the forum were eager to allocate more capital to emerging managers, they emphasized that firms must meet key expectations:
- Performance is the top priority. Investors need clear, data-driven proof that a fund can deliver returns.
- The strength of the team matters. Investors assess who is leading the firm, their pedigree, experience, and relationships—a strong team can reinforce confidence in the firm’s ability to execute.
- Services and operational infrastructure are under great scrutiny. LPs are running stricter due diligence processes, requiring managers to demonstrate strong security posture, compliance practices, and operational infrastructure.
- Technology is becoming non-negotiable. Investors favor tech-enabled managers who leverage automation, AI, and cybersecurity best practices to operate more efficiently.
- Scalability matters. Emerging managers must demonstrate institutional-quality operations and the ability to handle growth seamlessly.
What this means for emerging managers
If you’re an emerging manager, the takeaways from the forum are clear: institutional investors want to invest, but they need confidence that your firm can deliver returns, scale efficiently, and operate with institutional rigor. The managers who will stand out are those who:
1. Deliver comprehensive reporting and data transparency
Communication is key to attracting and retaining institutional capital. Investors expect clear, reliable, and accessible data to make informed allocation decisions.
- Can LPs easily access the information and data they need when they need it?
- Are you providing institutional-grade reporting that meets investor expectations?
- Have you automated investor communication workflows to improve efficiency?
2. Demonstrate security and risk management maturity
Cybersecurity is a top concern for institutions allocating to emerging managers. Investors want to know if a firm can safeguard investor data, demonstrate regulatory compliance, and mitigate operational risk.
- Do you have robust cybersecurity policies that align with best practices?
- Are you monitoring compliance in real time?
- Are you leveraging market-leading infrastructure that ensures data security and operational resilience?
3. Automate the manual, focus on growth
Institutional investors want to work with managers who can scale efficiently. Automating routine operations—investor communications, compliance workflows, and portfolio reporting—frees up time to focus on strategy, investor relations, and business growth.
- How much time is your team spending on low-value, manual tasks vs. portfolio management and relationship building?
- Are you leveraging automation and AI to improve operational efficiency and decision-making?
4. Prove that you are built for long-term scalability
Institutional investors aren’t just evaluating today’s performance—they’re looking at whether an emerging manager can sustain and scale over time.
- Do you have the proper data infrastructure to support future growth?
- Are your workflows built to handle an expanding LP base without creating inefficiencies?
- Are you making smart, strategic investments in tools and processes that prepare your firm for long-term success?
The path forward for emerging managers
The discussions at the FTLT Emerging Manager Forum reinforced a critical takeaway: institutional investors want to allocate to emerging managers, but the firms that succeed will be the ones that demonstrate performance, embrace technology, and build scalable infrastructure
For emerging managers, the question is, “How do I prove that my firm is a long-term, institutional-quality investment partner?”
By prioritizing data-driven decision-making, automation, and operational efficiency, emerging managers can overcome institutional inertia and secure the capital they need to scale.
Want to learn more?
Allvue provides technology solutions designed to help emerging managers meet the demands of institutional investors. By streamlining operations, enhancing transparency, and enabling scalability, our tools empower you to focus on delivering strong returns.
Key offerings include:
- Private Equity Essentials: Simplify portfolio management and reporting while gaining valuable insights through analytics and deal flow tools.
- Fund Administration Essentials: Automate back-office processes with efficient fund accounting, investor portals, and custom reporting.
- Private Debt Essentials: Manage complex loan structures and monitor credit performance easily through integrated solutions.
With scalable, intuitive platforms, Allvue equips emerging managers with the tools needed to build confidence and secure long-term growth.
More About The Author
Chloe Swierzbinski
Sr. Manager, Product Marketing
Chloe Swierzbinski is a Senior Product Marketing Manager at Allvue. With a background in product marketing at leading financial technology companies, she brings deep expertise in understanding market trends and customer needs. At Allvue, Chloe is dedicated to delivering impactful go-to-market strategies that empower firms with innovative technology to drive efficiency and growth.
