To expand on my last post, The Three Pillars to Achieve Operational Alpha, this blog shares my insights from InvestOps 2024 and explores the key operational requirements to manage the growth in private markets.
Has the steady growth in private markets over the last several years impacted a firm’s ability to grow and manage its operations? During InvestOps 2024 in Orlando, I participated on a panel that sought to answer these questions.
The panel, Operating in Private Markets: How can you build and scale operational capabilities to support growth into private and alternative asset classes, explored how firms investing in private markets should evaluate the various technology solutions available, as well as understand the benefits of leveraging an outsourcing and co-sourcing partner. Each participant shared their views on operational excellence, particularly outsourcing manual processes. The growth in private markets is creating more competition, and as a result, LPs are requiring more transparency and investor due diligence. As firms weigh the benefits of technology, they should ensure that these solutions meet their reporting and data requirement needs.
Given the impact of market conditions, the evolving needs of outsourced clients were a significant aspect of our panel’s conversation. The growth in private markets affects how investors and firms respond to this trend.
Investor and market demand drive client needs.
For SS&C Advent more than 95% of our new clients leverage our Managed Services offering beyond the software and solutions that we provide, whether it is hosting technology or partnering with our operational services team. Therefore, we are constantly fine-tuning and investing in this area. As both a technology and a service provider, we must support our client's ability to utilize our products and benefit from our outsourcing services. We are the biggest users of our technology, which makes this mutually beneficial – our client’s needs are also our needs.
However, whether a client outsources its technology or operational activities, its operational needs tend to fall within three verticals: people, data, and technology.
People, Data, Technology
As a technology partner, we have to invest in R&D in our solutions to build tools and functionality that support the expansion of private markets, including managing the following:
- Manual nature of these asset classes (e.g., private credit, fund investments)
- Legal entity structures or the investor-level capital flows and accounting
- Archaic process of accessing and using market data
As a firm, assessing our clients' workflows and dataflows is paramount to the success of our solutions. Investing in understanding how our clients interact with data and our products ensures that we make it as streamlined as possible. In some cases, the manual nature of these investments cannot be totally removed, so making these steps as easy as possible is key.
From a data perspective, one of the most common pain points we hear from clients is access to readily available market data. This access includes data acquisition, normalization, and digitization. We have invested in OCR and AI capabilities to streamline this process to help our clients consume and digitize loan activity notices or even digitize LP statements, cap statements, or any cash flow events. With this technology, we have launched data services like SS&C Loan Data to digitize all loan setup and activity across both BSL and private loans. The output is then automatically sent to a downstream system, like an accounting system or data warehouse.
From a human capital perspective, we are experts in our systems. We significantly invest in acquiring and retaining knowledge and talent. Our private market teams have grown in line with market trends.
What does this mean for private markets?
When it comes to private markets, funds are generally looking to partner with providers investing in these three verticals to support this growth. This speaks to the space’s manual nature and the difficulties in supporting its growth from an operational standpoint.
Overall, the conference and private markets panel provided attendees with actionable insight into these growing asset classes and what to consider when evaluating technology and services. For those evaluating the various solutions and managed service offerings available from SS&C Advent, request a demo or contact us for more information about the solutions available for private credit and private equity investors.
