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ASSESSING BANKS
With more and more private equity managers warming to the idea of outsourcing,
THE BANK OPTION
Banks’ robust balance sheets give them more flexibility to invest in resources, technology
(including disruptors like AI and blockchain) and services to cater for private equity cli-
ents, at least more so than smaller outfits. Simultaneously, banks often provide multi-asset
class coverage, an advantage which is particularly relevant to private equity as it transitions
away from being purely LBO-centric and into other products like direct lending, private
debt and hedge funds. Finally, banks can offer a slew of services beyond just administra-
tion, including M&A advisory, depositary and cash management.
Conversely, banks have faced criticism for being un-wieldy, and providing commoditised
services, something which does not bode well for private equity which is diverse and often
requires customised solutions. One administrator said banks had repeatedly overegged
their credentials when pitching their bundled offerings. “Banks have been saying to private
equity for years that they can offer a bundled service proposition, but I have yet to see it,”
said one administrator. A handful of bank providers have also spun off their low margin ad-
ministration businesses to shore up balance sheets, something critics say causes disruption
to clients.
12
Global Custodian
Private Equity Issue 2018