Private capital markets are the big growth story in the global investment industry, attracting an expanding array of institutional and individual investors, and managers eager for a slice of their allocations. But operating in this environment is testing. Along with sustained investment performance, managers need to deliver transparent, responsive services to clients and comply with evolving regulatory obligations – and they are looking to their fund administrators for help.
New market opportunities bring operational complexity
A flexible, multi-asset class, front-to-back administration offering that allows managers to pivot into new markets and keep pace with investors’ shifting expectations is key. Private debt is a prime example. The sector has seen an influx of managers and investors. Supporting the funds through calls for an integrated offering spanning everything from collateral and loan administration to fund accounting, financial reporting, investor reporting, and performance, waterfall, carry and management fee calculations.
Infrastructure is another burgeoning area, with listed alternative asset managers enjoying their second-best fundraising quarter on record in Q4 2023 as investors up allocations. Decarbonisation, impact and energy transition funds are proliferating as global decarbonisation trends gather strength, requiring better data collection, management and dissemination to meet ESG-related reporting and categorisation demands. With a 20- or 25-year lifespan, infrastructure funds will benefit from a full administration service that can offer flexible financing capabilities to support their strategies.
More clients demand a bespoke service fit
Client demands are changing too. Fund structures are becoming more complex to accommodate bespoke investor needs. They may be composed of different entities (such as Separately Managed Accounts, Co-Investments, CarryCos, Special Purpose Vehicles and Securitisation Vehicles) domiciled in various jurisdictions. General partner sponsors require increasingly granular monitoring by share class by investors by deal to provide detailed, multi-GAAP, multi-jurisdiction, multi-currency investor reporting and complex waterfall calculations.
Mainstream fund managers are also expanding into private markets in search of assets and fees. The administration demands around subscriptions, redemptions, capital calls, drawdowns, valuations, P&L allocations, performance calculations and reporting are a step up from traditional funds and call for specialist solutions. Hybrid funds that combine illiquid assets in semi-open ended structures pose a further challenge. Managers in turn are seeking experienced administrators with the knowledge and tools to support these books of business across the cycle.
In addition, we are seeing more asset owners managing their own private markets investments. Unwilling or unable to take on the operational burden, they are outsourcing the associated middle-office operations to get the accurate cash flow management of the underlying funds in which they invest and related look-through into their investments without the effort.
The value of technology partnerships and co-creation
As administrators take on more functions for more clients, technology infrastructure quality will assume ever greater importance. At BNP Paribas, our utmost goal is to help our clients streamline their operations. To do that, we have made significant investments in our people and platforms, with the guidance of our cornerstone clients, in an effort to automate processes wherever we can .
Our core platform is BlackRock Solutions’ eFront Invest. As a key strategic partner for eFront, we work closely with BlackRock Solutions to develop the bespoke system capabilities our clients need.
In addition, we have partnered with a FinTech, AssetMetrix, to develop CapLink Private, a proprietary web-based platform for GPs and LPs. CapLink Private provides GPs with full transparency into their transactions, portfolios and investor registry. The tool manages workflows digitally, enabling online validation of notices and capital account statements before automated dissemination to LPs. And with CapLink Private, clients no longer need shadowing operations for the lifecycle valuation process, as they can access and upload all data at NAV date or any other date with near real- time refresh frequency.
A collaboration with Alter Assets Technologies for internal workflow and digital checklist technology provides a continual line of sight over all the payments, distributions and valuations across the funds to ensure any events or deadlines are tracked. By having all our controls and checklists visible digitally within the solution, communications to clients notifying exactly what is going on within their fund at any point in time, is possible.
People pleasers
Delivering the support today’s private capital managers and their clients need, and expect, is no longer possible without a sophisticated technology infrastructure. But it must be allied with expert people.
For example, we are hiring and training significantly more data scientists for investor reporting and people with mathematical skills for waterfall calculations where the complexity tends to increase (for example, deal by deal waterfalls especially in the US). Clients are also seeking support from specialist service teams that are on the ground in the same timezone, especially for their front office and finance functions. Having a multi-local model across Europe and APAC, and soon in the Americas, enables us to service managers in their location, wherever the fund is domiciled. At BNP Paribas, we support clients by presenting them with an integrated bank model that combines a complete fund administration offering with automated cash operations and a full range of financing options. By leveraging the bank’s unique capabilities, private capital managers can best support both their clients and their own needs in what is an increasingly competitive environment.
Patrick Hayes
Global Head of Alternative Investors
Securities Services
BNP Paribas
Patrick Hayes is the Global Head of Alternative Investors and is responsible for driving the Alternatives strategy and value proposition across solutions, products and geographies. Patrick is a member of the senior global BNP Paribas Securities Services Executive Committee and has over 30 years of experience in the funds industry. Prior to this role, Patrick was the Regional Manager for the UK, Ireland, Channel Islands, Middle East and South Africa.
Before joining Securities Services BNP Paribas in 2016, Patrick spent more than 25 years at State Street, most recently as the Senior Managing Director of International Fund Services Ireland for nine years from 2007 responsible for the EMEA Hedge Fund Serving business. Other roles included Head of UK Global Markets Operations and other senior roles leading fund accounting and operational teams. Patrick also spent two years as Head of Global Relationship Management for Global Fund Services clients at Northern Trust before returning to State Street in 2007.