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Allvue Systems (“Allvue”), a leading alternative investment technology solutions provider, today released the results of its survey of General Partners (GPs) across hedge fund, private debt, private equity (PE), venture capital (VC), and traditional asset managers. The survey explored the largest challenges and shifts GPs are experiencing in private markets and their plans to diversify across asset classes in response to investor demand.
“The continued growth in private markets has led to increased competition, mounting reporting demands from LPs, and additional requirements as regulators look to make these complex asset classes more transparent,” said Marc Scheipe, CEO at Allvue. “These survey results highlight an urgent need for GPs to streamline their operations with the right partners so they can meet this demand and focus on investment decision-making to remain competitive in this market.”
The private markets space has experienced significant growth, which has greatly impacted GPs in the space. The largest portion of GPs surveyed (25%) identified the influx of entrants to the space creating higher competition as having the largest impact on their operations, while another 18% identified increased demand from LPs for private markets allocations as they look to access these opportunities.
This dynamic was particularly strong among private debt managers, with 40% listing demand from LPs and 34% listing more entrants to the space as having the largest impact on operations. These results illustrate the recent rush to private credit as a highly sought-after asset class, creating significant opportunities but also challenges for GPs.
Survey findings also suggest that this market growth will only continue. 47% of GPs, and notably 56% of traditional asset managers, polled plan to explore new asset classes over the next 3-5 years, and private debt, PE, and VC appear to be the asset classes to watch with 34% of private debt, 31% of PE, and 31% of VC GPs ranking increased competition as having the greatest impact on their operations.
Despite the operational burden that GPs face from increased competition and LP demand, few reported having integrated third-party support for portfolio and data management.
Overwhelmingly, GPs surveyed stated that demand for reporting is the largest challenge they face in terms of managing their operations, with 38% pointing to periodic reporting to LPs and regulators and 32% pointing to ad-hoc LPs requests. Data management also presents obstacles, with 14% of GPs identifying access to portfolio company data and 10% identifying lack of data transparency as their largest challenge to operations.
Respondents largely reported that they struggle equally with front-, middle-, and back-office operations, but 50% of PE managers reported their largest challenges are with the middle-office, which can encompass risk management, compliance, portfolio monitoring, ESG progress, and benchmarking. By comparison, 50% of traditional asset managers reported the largest challenges with the back-office operations, which include accounting and investor and regulatory reporting and data requests.
“These results highlight the data complexity that’s inherent to the private markets, compared to public markets that benefit from data transparency and formal filings in exchange-traded products,“ said Yuriy Shterk, Chief Product Officer at Allvue. “In order to actively monitor their portfolios and measure true fund performance, PE managers need to manually and periodically source data from portfolio companies as well as determine and execute on how to best analyze it to unlock meaningful insights. Compound that with the increased LP demand for asset class diversification as well as specific ESG tracking, and it’s clear that PE managers urgently need solutions to help streamline this significantly tedious and time-consuming process.”
Despite these growing pressures, GPs are falling behind in their use of sophisticated third-party partners to support operations.
The survey found that a large majority of GPs polled (89%) use fund administrators, but many are not using them as effectively as possible.
Notably, only 12% of GPs reported that they currently employ co-sourcing, a streamlined operating model where a fund administrator executes accounting and reporting on the GP’s software property, enabling them to keep possession of their data in house. A majority of GPs (62%) reported that they had not heard of it at all. Large managers are particularly far behind in this area, with no firms over $10B AUM reporting adoption.
On top of this, 63% of GPs are still manually overseeing their data management.
“Data management and fund administration can be both time-consuming and expensive, and as managers continue to expand, it will become even harder to effectively maintain workflows and meet reporting requirements,” said Yuriy Shterk, Chief Product Officer at Allvue. “Partnering with a holistic, agile partner like Allvue and adopting a co-sourcing model will significantly decrease the operational burden for managers, and enable them to seamlessly adapt and manage data as they enter new asset classes with different structures and reporting requirements.”
The survey was conducted at the SALT iConnections New York Conference in May 2023 and includes 100 responses from GPs.
Allvue is a leading provider of technology for investment managers in the private capital and credit markets industry. Its mission is to empower superior investment decisions by pairing modern cloud-based software solutions with capabilities across multiple asset classes. Allvue’s software solutions serve the entire investment lifecycle and are seamlessly integrated to provide a comprehensive product suite, serving investment managers of all sizes worldwide, including general partners, limited partners, fund administrators, and banks.
Allvue was established in 2019 through the merger of Black Mountain Systems and AltaReturn, two leading providers of investment technology solutions. Allvue is based in Miami, FL with locations throughout North America, Europe, and Asia-Pacific. With a commitment to innovation and a focus on multiple asset classes, Allvue’s software solutions allow its clients to operate and grow their businesses more effectively by automating manual processes, improving data accuracy and consistency across workflows, and delivering enhanced analytics.
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