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More investors and more deals are piling the pressure on private capital CFOs
In general , have you observed any additional pressures on private capital CFOs from the broadening of the investor base for private capital funds ? The private capital market is growing exponentially and the interest in deals and investments is rapidly increasing . That puts a strain on all operational components and has led to a dramatic increase in the number and nature of demands on the CFO . We are seeing managers face challenges at all levels of the market – whether a start-up looking for the right systems and personnel for launch or a global firm grappling with the demands of the 24 / 7 operating paradigm . From fundraising to deal management and financing to operations , deliverables and pressures are increasing across the board . One major example is the ongoing investor-base shift into “ retailisation ”. In August 2020 , the US Securities and Exchange Commission ( SEC ) expanded
its definition of “ accredited investor ” to allow more investors to participate in private offerings . The SEC expects the total pool of individual investable assets to rise from USD 70 trillion in 2018 to USD 106 trillion in 2025 , while average allocations for individual investors are less than 5 %, compared with 27 % for pension funds and 29 % for endowments . That flow of retail funds into
A shortage of specialist staff and exponential growth in demand are driving many CFOs to pivot their strategies , says Marshall Saffer , Global Head of Funds , Intertrust Group
alternatives over the next five years will likely be slow and steady . To capitalise on any increase in “ retailisation ” in private markets , fund managers will need to add more customer-centric capabilities , such as more frequent and regular reporting , to support this distribution channel .
This is the second consecutive year that Intertrust Group has run its Future Private Capital CFO survey . What for you were the most interesting differences in the results ? We are seeing increased regulation and regulatory reporting responsibilities , as well as a need to supply detailed and credible ESG data and information on diversity and inclusion ( D & I ). Investors are asking for more information and greater transparency . While institutional investors are still at the heart of the market , there is an ongoing demand from retail investors and high-net-worth investors . These changes dramatically impact operations , service providers and staffing for all types of CFO . Retail investors are coming in with smaller amounts , and so it becomes a volume game . When CFOs start dealing with hundreds of investors or thousands of them , rather than one or two very high-profile investors , the nature of the processing – and what you have to do for capital calls and distribution tracking – changes significantly . In addition , investors in different jurisdictions also have different demands . Their needs vary based on where they are physically domiciled – plus there are currency and regulatory issues to contend with in different global jurisdictions .
50 Global Custodian Fund Services Annual 2022