Despite the narrative that democratized technology should level the playing field, a new Hedgeweek survey finds hedge fund allocators largely unmoved by technological upgrades among smaller and emerging managers. Their capital allocation decisions continue to expose a persistent “trust gap” that technology alone cannot bridge.

The premise is clear: The operational “moat” built by massive capital expenditure is undeniably shrinking. Cloud-based systems and subscription analytics have made institutional-grade technology accessible to all. Indeed, 45% of allocators acknowledge that smaller managers now offer technology capabilities comparable to their larger, established peers.

However, this technological convergence is not translating into easier fundraising. Among managers, only 27% report that winning new institutional mandates has become easier, while 73% find the fundraising environment trickier or more challenging than before.

The consensus from allocators is brutal: operational infrastructure is now merely “table stakes,” not a reason to allocate. A chief investment officer at a European pension fund stressed that they “expect managers of any size to have proper systems” and are focused on evaluating genuine alpha generation. Allocators simply assume technological competence rather than rewarding it with faster capital deployment.

The data suggests managers may be focused on the wrong target. While they invest heavily to close the technology gap, allocators are prioritizing deeper structural realities that remain resistant to technological shortcuts. Institutional capital still favors organizational stability, team depth, and a proven track record. A sophisticated risk system cannot replace a seasoned Chief Risk Officer, and automated workflows do not substitute for institutional memory forged across multiple market cycles.

For emerging managers, the message is clear: capital allocation decisions continue to hinge on investment performance, team quality, and institutional credibility. While the technology gap may be narrowing, the trust gap stubbornly persists.

End Notes

Source: https://www.hedgeweek.com/the-trust-gap-why-hedge-fund-operational-tech-improvements-havent-opened-allocator-wallets/