Sanne's Natalie Breen and Richard Murray feature in the December edition of the Private Equity International, explaining how the professionalism of fund services opens up opportunities for managers grappling with LP demands across areas such as data and ESG.
As published in the December 2021 edition of Private Equity International.
Natalie Breen: The alternatives industry has seen a big push toward a professional services model, which means being a trusted adviser to clients in the same vein as large law and accounting firms. Managers are not just looking for traditional administration and corporate services, they are looking for a long-term partner to provide proactive value-add and complementary services, whether that is in financial reporting, ESG advisory or technology and data solutions.
This move toward a complete professional solution has driven a large amount of consolidation in the industry, with quite a few examples of mergers and acquisitions. That is going to continue as we head toward a Big Four dynamic, with a small group of large global players alongside bespoke, more specialist offerings from smaller firms. Managers want more vertical integration from providers; they do not just want geographical coverage but seek a full suite of services so they can consolidate the number of providers they work with.
Covid-19 highlighted the importance of flexibility and real-time data requests, which have become a focus for managers and their investors. To the extent that our industry can help managers source, collate and share data in a secure environment is something they value. ESG commitment has also been accelerated across alternative asset classes because of the pandemic. Investors want fund managers to provide more data around ESG management and reporting, and GPs will look to their fund administrators to deliver bespoke solutions.
Richard Murray: The clear driver for outsourcing is to enhance efficiency and effectiveness for any business. Building your own teams in non-core areas when you are an investment manager brings additional risk and cost, with the need to keep up with best practice as well as sourcing and developing talent.
We are in a fast-developing world from a technology perspective, which demands further efficiencies, better governance, and simplified solutions for sharing and analysing data. Managers want their third-party service provider to be proactive and approach them with solutions that will create efficiencies and reduce written and manual processes in their business. The benefit of outsourcing to the right service provider is that seamless output of data for investors, with managers getting the upside of the service provider’s scale, investment into leading technology, in-house talent and knowledge of best practice.
The right strategic partner will also gauge a client’s requirements and be proactive in sharing what they are observing in the data, highlighting trends in the market and advising on how best to set up operations.
NB: Clients want a strategic service provider that understands their business, can provide bespoke solutions, is flexible as business ebbs and flows, and with whom they can build a longstanding relationship. They also want to work with a partner that shares their company values, which is why it is important for us to demonstrate our commitment to ESG and diversity.
Premium quality service and output is the number one priority, because it is fundamental that we deliver – there is no compromise. Managers look to their service providers to deliver solutions around overall efficiency and the cost of fund administration and corporate services, either through technology or through right-shoring. We facilitate discussions with clients about right-shoring, making use of our operations in high-quality locations to support them. They want to be able to outsource functions they consider noncore and find the right model to suit the outcome they are trying to achieve. The best outcome is when a client feels that their service provider is an invisible extension to the CFO, providing strategic support as an in-house specialist would.
RM: Global managers operating in different countries and time zones experience their own challenges around ensuring consistency of information and availability of data across the businesses, which have often grown fast. In the past, they had a diverse range of service providers, by asset class and jurisdiction, but they are increasingly seeking to consolidate those relationships and maintain oversight with one cross border provider. LPs and GPs want a strategic partner that can deliver on time critical transactions, consistently across jurisdictions and client service levels, with appropriate technology-enabled computations and data delivery.
RM: If you compare private markets to the liquid alternative markets, liquid markets by their nature use technology more effectively and the gap is closing. There are plenty of ways to bring automation to clients without losing that important human element and relationship.
Investors want access to information as readily as possible, in addition to quality control, speed and accuracy. How you manage data as a service provider, and how joined up you are across disciplines and services within your business is key. Managers want an easy way of retrieving information through more innovative and user-friendly portals, however, digital transformation is only as successful as the quality of the teams providing the services.
NB: As the fund services industry evolves into a professional service offering, this has brought with it the need to deepen that culture of professionalism and responsibility within individual businesses. The sector has really grown, and it now includes huge global advisory firms.
To attract top talent, we need to offer the career paths people want and need, creating flexible, diverse workplaces, offering upskilling opportunities and fast-track career progression to grow and develop through secondments and different experiences. Employees have a lot of choice, but as a leading global professional services firm, we are well positioned to attract and retain talent into successful long term careers in the sector, for the benefit of clients and most importantly our people.
RM: Professionalisation means not just providing a service but being a critical sounding board to a client in the ongoing development of their business. Attracting and developing quality people is key to this objective and driving consistency in best practice globally and across product lines no matter the time zone, as well as utilising our global team, process and technology to deliver quality deliverables and a high touch client service.
Client service remains a top differentiator; while some service providers already have a tried and tested client service model, it is easy to differentiate those which are still developing. The industry will continue to see the enhancement of enabling technology that will ensure greater accuracy, validity and completeness of the work, and ultimately delivering a far more readily available and polished offering.