By: Pat McBrearty
Global Head of Partnerships
February 27, 2024
In a recent conversation from IQ-EQ’s Meet the Experts series, Graham Roche, Director of Fund Management, and Joanne McEnteggart, Global Head of Debt, Capital Markets & Corporate from Allvue partner IQ-EQ, shared insights into the thriving world of private debt. More than that, we gained esteemed feedback on how a valued client and partner like IQ-EQ empowers their client base with the help of Allvue software.
“[Allvue’s Investment Accounting solution] allows [private debt and CLO managers] to automate their processes across the entire investment lifecycle with straight-through processing into our fund accounting platform. This offering enables our clients to automate the whole loan administration process including loan calculation and reconciliation…It’s a real gamechanger.”
– IQ-EQ’s Joanne McEnteggart on Allvue
For the key takeaways shared in their conversation, viewable in a video interview here, read on.
- Private debt’s growth trajectory: McEnteggart highlighted the staggering growth projections for private debt, with its AUM forecasted to soar to $2.3 trillion by 2027. Factors such as rising interest rates, inflation, and the demand for tailored investment options are fueling this ascent.
- Navigating operational challenges: Roche and McEnteggart delved into the operational hurdles confronting private debt managers, notably the intricacies surrounding interest calculations. From compounding frequency to accrual methods, these complexities often result in time-consuming manual processes susceptible to errors. Furthermore, the evolving landscape demands sophisticated strategies for accounting, analysis, and reporting.
- Harnessing the power of technology: McEnteggart underscored the pivotal role of technology in addressing these challenges. IQ-EQ’s partnership with Allvue provides private debt managers access to cutting-edge platforms, streamlining operations and enables automation across the investment lifecycle. Allvue’s Investment Accounting solution, seamlessly integrated with IQ-EQ’s fund accounting platform, revolutionizes loan administration and increases efficiency.
- Emerging trends shaping the industry: Market volatility presents both challenges and opportunities for private debt and credit managers. Larger asset managers are reevaluating their operational frameworks, with a growing emphasis on efficiency and resource optimization. IQ-EQ has observed a notable trend towards carve-outs across various asset classes, signaling a strategic shift in the industry landscape.
The private debt sector continues to evolve, presenting many opportunities for managers, fund administrators, and LPs alike. By embracing technology, forging strategic partnerships, and staying attuned to industry trends, stakeholders can chart a course towards sustainable growth and success.
Allvue offers a modern suite of solutions that can power every aspect of a private debt manager’s business from portfolio management to compliance to accounting and reporting. With robust workflow and data management capabilities, Allvue supports the entire credit investment lifecycle, empowering private debt managers and fund administrators for success in today’s dynamic market landscape.
Watch the full video of the here or read the full transcript below.
Graham Roche | IQ-EQ, Director Fund Management
Joanne McEnteggart | IQE-Q, Global Head of Debt, Capital Markets & Corporate
Graham: So we’re here today to talk about the world of private debt.
Joanne: Yes, we are.
Graham: The private debt AUM is predicted to increase at a compound annual growth rate of 10.8% reaching an all time high of $2.3 trillion dollars by 2027. So Joanne, why do you think private debt as an asset class is doing so well amid such a challenging macro economic environment?
Joanne: Private debt is fast emerging as a really hot asset class. According to Preqin data, it is one of the assets that have grown steadily since 2018. There’s probably three factors leading into that. Factor #1 is increase in interest rates and growing inflation. That has meant tightening on financial conditions for people wanting to borrow money and making it more difficult for people to borrow #2. The aggressive macroeconomic background is making it challenging for investors to hedge against their inflation exposure. So the floating rate aspect in private debt and credit allows them to hedge that exposure. Borrowers are also negotiating better covenant positions. #3 from a borrower perspective, the credit and debt asset is very customizable, allowing for a longer duration and matching the profile of the asset to the investor’s needs.
Graham: Can you tell me about some of the operational challenges that private debt managers are facing at the moment?
Joanne: At IQ-EQ we have a growing client base of private debt managers. One of their main challenges is around the calculation of interest, as it can vary in complexity depending on what’s set out in the limited partnership agreement. Private debt managers also need to consider factors such as compounding frequency, the accrual methods, and any additional fees or charges that may impact on those interest calculations. We’re seeing a lot of clients doing those calculations in Excel and it takes a lot of time and it’s also prone to a lot of errors. Strategies, accounting, analysis and reporting: they’ve all become more and more complex.
Graham: And could technology be a solution?
Joanne: Absolutely. The complexities are driving the need for technology platforms that allow private debt managers to efficiently deliver insight and reporting while developing ever more efficient business models. At IQ-EQ, we’re using leading technology and have developed our own proprietary platforms to best automate and streamline processes to minimize manual processing. And for debt managers, we’ve entered into a strategic partnership at Allvue. To which IQ-EQ’s private debt managers and our CLO clients can leverage the Allvue investment accounting solution. This allows them to automate their processes across the entire investment life cycle with straight through processing into our fund accounting platform. This offering enables our clients to automate the whole loan administration process including loan calculation and reconciliation. Allvue also allows IQ-EQ to provide our loan agency and private debt, the loan administration services covering a range of asset types including but not limited to senior mezz, broadly syndicated loans, private debt loans and bonds, and corporate and municipal bonds. It’s a real game changer. What’s more, we’ve just launched our own data platform to which we can deliver the data we administer to our clients directly onto their in-house system, fully automated, digital and structured. So our clients don’t have to go scrambling through those multiple Excel files or folders to find the data that they need.
Graham: And finally, Joanne, in your view, what are some of the key trends impacting this asset class?
Joanne: Market volatility is creating opportunities for private debt and credit managers. Volatility is also leading those larger asset managers to reconsider their operating models. There’s growing client interest in driving efficiencies by either restructuring their back office or switching service providers or considering lift outs. Asset managers can make the operations more efficient, they can strategically identify and separate the non-core activities or functions from their main operations. This allows them to focus on their core competencies and allocate resources way more effectively. At IQ-EQ, we’ve worked on a number of carve outs recently and this is a trend that we’re really seeing in the market at the moment and we’re seeing it across all different asset classes.
Graham: And thanks, Joanne, that’s been really useful. So how do people find out more about private debt?
Joanne: Log on to iqeq.com and reach out to us to have a chat about how we can help you.
More About The Author
Pat McBrearty
Global Head of Partnerships
