By Laura Merlini, CAIA, CIFD, Managing Director, EMEA, CAIA Association
When the Walls Come Down
In AD 122, Hadrian built his wall across northern Britain - 80 miles of stone and turf to separate Romans from barbarians. For three centuries, it held. Then economics changed, geography shifted and the wall became irrelevant. The barbarians didn’t storm the gates; they walked around them.
Today’s alternative investment industry faces its own Hadrian’s Wall moment. Traditional boundaries between public and private markets, institutional and retail investors are crumbling under pressure from technology, regulation and evolving customer expectations.
Our London Vision 2035 roundtable - the fifth stop in our eight-city journey - revealed an industry where defensive walls are becoming obsolete faster than new fortifications can be built.
The Scale Imperative
Large pension schemes are building internal capabilities at unprecedented rates, driven by simple economics: managing alternatives internally costs dramatically less than paying external fees. Organizations following the “one per billion” rule - roughly one professional per billion dollars of assets - gain massive advantages in talent, technology and market access.
This creates natural market segmentation. Those above the threshold become direct competitors to external managers. Those below face increasingly difficult choices about operating models as fee pressure intensifies.
AI as Infrastructure
Artificial intelligence is moving from experimental technology to essential infrastructure. The industry is rebuilding fundamental processes - credit analysis, risk monitoring, portfolio construction - around AI capabilities rather than simply automating existing workflows.
Organizations successfully deploying AI gain surveillance capabilities that extend beyond traditional boundaries. They process vast data sets, identify invisible patterns and execute strategies at speeds that render conventional approaches obsolete. Implementation remains complex and expensive, but early success creates potentially insurmountable advantages.
The Return Reality
The alternatives industry faces an uncomfortable truth: premium returns that justified high fees operated in a specific environment of low rates, limited competition and genuine scarcity. That environment is disappearing.
Interest rates have normalized. Competition has intensified. Many strategies have matured from innovative to commoditized. Organizations face a binary choice: deliver genuinely superior returns or accept margin compression. The middle ground grows more precarious each quarter.
Retail Expansion
Democratization represents the industry’s largest untapped opportunity. Institutional allocations to alternatives dwarf retail allocations, creating a massive addressable market becoming more accessible through product innovation.
Semi-liquid funds, interval structures and hybrid vehicles solve the tension between retail expectations and private market characteristics. Success requires mastering new competencies: mass customer service, multi-jurisdictional compliance, investor education at scale. Organizations that crack this code access vast new capital sources.
Geopolitical Fragmentation
Political considerations are moving from background factors to active constraints. Government pressure for domestic investment, international exposure restrictions and regional regulatory divergence fragment once-unified global markets.
Capital flows now face political checkpoints. Investment strategies must account for political alongside economic factors. The future may belong to organizations operating effectively within multiple, partially connected regional markets.
Skills Evolution
Investment professionals need fundamentally different capabilities. Technology literacy rivals financial analysis. Regulatory navigation equals investment acumen. Stakeholder management across diverse constituencies shapes career trajectories.
The war for talent focuses on areas where finance intersects technology. Organizations attracting hybrid-skilled professionals gain significant advantages in an increasingly complex environment.
The Path Forward
Traditional competitive advantages erode while new ones emerge. Historical performance matters less than technological capability. Established relationships yield to operational scale. Brand recognition gives way to regulatory agility.
The organizations that will dominate recognize this fundamental shift. They are not preserving old business models but building new ones optimized for transformed competition.
Like settlements that thrived after Hadrian’s Wall was abandoned, success belongs to those who stop defending obsolete positions and start building the future. The barbarians are inside the gates. The question is how to thrive in the civilization they’re creating.
Interested in our insights on our 2035 Vision from around the globe? CAIA’s leadership team provides an exclusive peek into candid conversations that are shaping the future of investing. Check them out below!
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About the Contributor
Laura Merlini, CAIA, CIFD, is Managing Director, EMEA, for the CAIA Association since March 2012. She is a senior alternative investment professional with experience in strategic leadership, management skills and alternative investment knowledge in market outreach, brand development, reputation and member engagement. She formerly worked at Fortis Bank in Milan, Madrid, and Geneva. Since obtaining her CAIA Charter Certification in 2007, she has been an active member-volunteer, not only as the Co-founder of the CAIA Iberia Chapter in Madrid in 2008, but also as the Co-head of the CAIA Switzerland Chapter in Geneva as of 2010. Additionally, she chaired the 100 Women in Finance Educational Committee in Geneva between 2016 and 2018. Laura earned a BA in Business Administration at Bocconi University in Milan, received the CEMS MIM (Community of European Management Schools) MSc in International Management in 2002, and is a member of the Inaugural Class (2014) of the Executive Master in Positive Psychology, Leadership and Strategy from IE in Madrid. She strongly believes that governance is the core of a healthy financial industry, and this conviction led her to become a Certified Investment Fund Director accredited by the CIFD Institute in Ireland in 2015. Laura is also currently a member of the UN PRI HF Advisory Committee and a NED at Agave Advisors, an independent wealth manager firm based in Geneva. She is often invited to speak at conferences, roundtables and webinars on alternative investments. Having earned a Sommelier diploma, in her free time, she enjoys wine tasting as well as opera and art.
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