Tyler Kim, global head of fund services, Maples Group
Family offices and outsourced CIOs will become increasingly significant allocators to alternative investment funds. They will require more sophisticated operational infrastructures to take their investment programs to the next level and will look to fund administrators and other service providers to deliver solutions that can assist in that regard. As the world emerges from the COVID-19 pandemic, attractive investment opportunities will present themselves at different times, in different geographies and across various asset classes. Managers will need to have multi-jurisdictional structures in place that enable them to react quickly to capture tactical opportunities and rapidly deploy capital.
Lastly, just as the shift to working from home was a theme of 2020, the industry will need to contend with challenges of returning to the office in 2021. The world has changed, and all industry participants will be seeking to redefine the role of physical office space going forward.
Anne Anquillare, CFA, CEO and President, PEF Services
As the private capital industry continues to experience one of the greatest disruptions in its history, having enhanced levels of transparency is vital when communicating with and reporting to investors. We will see technology rise up as both a business driver and a market differentiator in fund services in 2021. Our industry has long been plagued by repeated reconciliation efforts due to lack of access by all parties to data sourced directly from the official books and records of the fund. Through technology, and an investor portal in particular, that offers direct access to this ‘golden source of data’, our industry will reach new levels of transparency, efficiencies, and self-sufficiency in reporting and substantially decrease investor frustration and concern with private capital investing. For middle market firms, using a third-party that leverages industry standards and provides purpose-built technology solutions could be a game changer in accessing capital.
Mark Hedderman, director, funds and corporate services, JTC Group
The most significant challenge for fund administrators today is the increased pressure and expectation from Managers for additional services such as compliance and regulatory support whilst continuing to only pay for one-off NAV provider. The advancement of technology and data means that the accurate delivery of the financial accounts of a Fund is almost a given and Managers, rightfully to a degree, look for the ‘value add’ in other areas. The pressure on administrators to absorb the responsibility, and cost, of these ‘add on’ services AND at the same time having to compete in a business dominated by PE backed admins reducing fees to ‘buy revenue’ and a race to the bottom fee wise, has created a very demanding environment where a breaking point will have to come.
Ted O’Connor, head of treasury sales, Arcesium
Consolidation is gaining momentum in the alternative asset management industry. As this trend continues to accelerate, many firms will respond by reimagining their people, processes, and technology ecosystems. They will need to ensure proficiency in handling more strategies, asset classes, and legal entities. This leaves COOs and CTOs to consider how to maintain a level of excellence, given the smaller pool of financial resources available. As managers evolve their infrastructures, they’ll need to rethink their mosaic of technology systems and procedures and determine how outsourcing plays a role. Given current market pressures, like margin compression, COOs are making difficult operational decisions, challenging middle- and back-office operations teams to do more with less to drive performance. Firms that leverage scalable technology solutions, particularly those supported by highly skilled outsourced teams, will minimise their costs and operational risks, freeing up resources to re-focus on higher value-adding activities for their institutions and investors.
Jason Bingham, chief strategy officer, Sanne
The recent breakthroughs with the COVID-19 vaccine are at least allowing investors to focus their attention beyond the current pandemic, to the long-term opportunities within private markets. We have seen the coronavirus crisis accelerate the trend for private capital to favour businesses with resilient growth prospects and executable plans to add value. This translates to favouring sectors such as software, technology, logistics and healthcare.
Although private markets have remained relatively resilient, they were not immune to the wider slowdown triggered by COVID-19. The numbers so far point to a dip in fundraising across the industry during 2020. As we look to 2021, we expect to see institutional investors increase their allocation to private debt strategies as managers continue to raise funds to provide much needed finance to businesses in need of third-party lending. Private debt managers have been able to deploy new capital and protect value in their existing portfolios, demonstrating the performance of the sector during the downturn.
As environmental and social issues develop during the year, we will also see a greater focus around ESG and responsible investing across investment products. There will be further impetus with the introduction of the EU Sustainable Finance Disclosures Regime (SFDR) coming into force in March 2021.