With ever growing exposure to non-public market assets, institutional investors are increasingly demanding better and consistent data and servicing solutions across their whole asset base – but with a continuing dichotomy between the specialist private markets and mainstream public markets service providers there is no easy answer.
We are seeing increasing industry challenges and demands – but to what extent are these being addressed?
The search for alpha has created significant tailwind for growth in private markets investments. Asset managers are increasingly exploring ways to scale their presence, whilst asset owners continue to grow their allocation to private assets.
For both, the challenge of better understanding and governing their private markets exposures – whether in terms of suitability, risks, performance and costs, and in conjunction and consistently with their public markets exposures, is growing and demanding more attention. Seeking help through outsourcing is well established across public markets – but it’s not so straightforward when seeking to include and consolidate private markets activities too.
Asset managers and asset owners are looking for partners to help them solve a broad set of growing pains around this rapidly evolving area of their business:
Governance
- Reducing reliance on Excel spreadsheets to allow more focus on value add activities and drive a reduction in operational risk.
- Clarity and convergence on sourcing strategy, outsourcing boundaries and ensuring appropriate and consistent oversight of outsourced services.
- Better delineation of responsibilities, particularly the separation of front from middle/back office activity.
- Fair Value pricing – robustness of the pricing process and the need for independent valuation.
- Focus on cost transparency, particularly for ‘non-core’ fees and expenses beyond management and incentive fees.
Scalability, access to and use of technology
- Suitability, selection and access to a broad range of specialist applications.
- The requirement to support and scale diverse, complex and bespoke asset classes and deals.
- The potential to seek shared solutions with service providers e.g. hosted or managed solutions
- Efficiency and operating model cost challenges.
Richness and integrity of data
- Capturing and interpreting unstructured data
- Client servicing and end-reporting demands – requiring consolidation across asset classes to meet increasingly demanding institutional investors’ requirements
- Reference data optimisation; leveraging specialist data sources to enrich processes and reporting.
- Increasing need for a single version of the truth covering public and private markets.
- Richer data in support of deal origination, increasingly sophisticated performance analysis and, of course, ESG.
- Frequency and timing of valuations – or the use of suitable proxies – particularly to support consolidation across multiple asset classes.
Institutional investors are actively seeking solutions – but few are being provided? Surely this gives an opportunity for the service providers to really step up and deliver pan-asset class solutions leveraging the data and analytics solutions many are bringing to the fore – and the opportunity to build and protect their business.
If you’d like to know more about our approach, please contact us.
Authors Ashley Sheen (left) and Dan Sharp
