Meliosa O'Caoimh, Northern Trust
: We have witnessed continued growth in alternative assets globally, driven by opportunities for enhanced performance and risk diversification. The trend is accompanied by demand for greater transparency from investors and a broader range of investment options – both in terms of asset types and fund structures. This has translated into our clients requiring easy access to a broader range of data, support for new or evolving fund structures and rapid time to market.
We continue to build solutions to meet those future needs, illustrated by the deployment of a state-of the-art loan administration platform to support the growth in private debt. More broadly, across the whole private capital class we are investing in the “user experience” for both the manager and the investor, to support their data and transparency needs.
As asset servicer to global investment companies, our job is to help make our clients’ – and their investors’ – lives easier through our services and solutions. Alternative structures and private capital especially continue to be part of the growth strategy among our client base. Through a consultative and collaborative approach, we engage with our clients and their investors to understand what is going to be important to them, so that we can be prepared to meet those needs when required. A recent example is the recent revision to the Irish Limited Partnership regime.
We feel we must earn the right to work alongside our clients every day by consistently delivering, but also by being ready to support new products, structures and experiences as requirements evolve.
Dirk Holz, Director, Head of Private Capital Services at RBC Investor & Treasury Services
: RBC is increasingly seeing demand from asset managers looking for additional services across the value chain of outsourced administration. Managers are looking to the market to help them deal with rapid growth in assets under management, strategies and jurisdictional footprints, whilst tackling cost base challenges. The ability of a fund admin to be able to work closely with their clients and also partner with other specialist providers on end-to-end service delivery, will support asset managers’ rapid growth plans.
Technology and data will continue play a huge part in how asset managers think about their operating model and the development of the industry over the next few years. Managers are looking to understand and analyse the rich data source from their investments to make better decisions and focus on their core activities. Therefore the ability to leverage technology to standardise and where possible automate the processing and administration of funds and provide clean, useable data will be critical to success.
People and their knowledge will be essential in supporting the industry in a post COVID-19 world. The ability to understand clients’ underlying investors’ needs and work collaboratively towards them, increases value add across the fund lifecycle. With the ongoing net inflow of institutional capital in to private capital, and increasing investor sophistication, investors are demanding more and more from their fund managers. Greater transparency from data and more frequent reporting is critical as they manage their private capital commitments.
Another investor trend we see is the growing appetite for private capital funds for retail investors, opening up a greater pool for asset managers to fund raise from. With this, we see an increased need for technology to process the volumes of investors and to provide a seamless onboarding and AML / KYC service in line with what retail investors experience today from mainstream funds. Our ability to partner with our clients to support their data and reporting needs both internally and for their underlying clients (investors) is an increasingly important part of being a fund administrator, and we only see this trend growing as more and more capital pours into the private markets.
Joanne McEnteggart, IQ-EQ Ireland
: Where does your company see developments in the next two years, citing examples from your company’s own business strategy. How can these offerings provide value for clients at the end of the distribution chain?
Private debt has emerged as an asset class of choice throughout the Covid-19 turmoil, performing well despite pandemic-induced economic slowdown. According to the findings of our recent private debt white paper, 95% of managers and investors predict that the market will continue to grow to record heights over the next three years. Similarly, the latest report on private debt published by Preqin in November 2020 highlights that 91% of the investors they spoke to will either maintain or increase their allocation to private debt over the longer term.
This is reminiscent of what happened during the global financial crisis, which saw a real surge in distressed funds. Private debt as an asset class tends to fare well during periods of economic uncertainty. As such, we’re seeing a number of private equity managers setting up a debt fund or a parallel debt fund and we believe this is a trend that’s here to stay.
As private debt becomes a more significant part of investor portfolios and as structures develop across multiple jurisdictions, the associated strategies, accounting, analysis and reporting become more complex. There is also increased need for technology to support the specific requirements of the asset class, for example around loan agency and loan management services. To this end, IQ-EQ has recently launched an enhanced Global Private Debt & Credit Desk, which builds upon our existing private debt/credit offering and provides clients a dedicated and globally integrated team of experts as well as leading software solutions tailored for the asset class.
Beyond private debt, at IQ-EQ we are also seeing more clients setting up hybrid funds with illiquid infrastructure or real estate assets in a more open-ended fund structure that provides a measure of liquidity to investors.?These structures demand a degree of flexibility, both in terms of a service provider’s operational delivery and the regulatory requirements that traditionally bifurcate into open-ended liquid vs. closed-ended illiquid strategies. Further, we are seeing more evergreen funds that are open-ended with no planned termination date.
Ross McCann, Alter Domus
: There are a number of developments expected over the next couple of years as the world emerges out of the Covid-19 pandemic. Immediate focus will be given to the ability of economies and sectors within to bounce back. Many businesses have survived thus far due to state interventions, but with support schemes expected to wind down in the second half of 2021, debt markets are bracing for a surge in corporate defaults, insolvency proceedings and debt restructuring. Private credit/debt has a massive opportunity to support businesses in a way that traditional lenders simply aren’t able or willing to do. The flexibility of private capital is also important for supporting the acceleration of ESG related projects, such as infrastructure and renewables, which will take prominence in economic recovery. The real estate market is a little more unpredictable and likely to see major variances in sub-sectors, for example with softer demand for retail, contrasting with major demand for logistics and warehousing. All to say the immediate future for the private fund markets looks very strong, globally and locally. Consequently, the service provider market is seeing new entrants and existing parties adding to their product suite, often through acquisition. Our own business, which is focussed solely on the private fund sector, is strongly positioned both globally and in Ireland, offering a fully integrated service solution covering fund and corporate services, depositary, and AIFM.
Tadhg Young, State Street
: At State Street, we envision that we will be asked to expand our scope of services beyond fund administration to private market firms to include data and analytics, as well as financing and liquidity services. Through interactions with our diverse private market clients, we see an expectation of general partners (GPs) to conduct portfolio management in a more dynamic way.
Regardless of whether they are a real assets fund managers, private equity managers or manage a fund of fund portfolio, their basic needs in data management and workflows are the same. With our platform, State Street Alpha, the goal is to incorporate and service data at all stages of a fund’s lifecycle and to add support and transparency across asset management, portfolio monitoring, ESG reporting and dynamic investor reporting.
Our platform allows us to consume data from various sources, normalise and clean the data through the use of business rules and automated workflows, enriching the data through its lifecycle at each stage. By acting as the data backbone for a GP’s operations, State Street Alpha will support all asset classes and their front-to-back requirements.