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European buy-side view alternatives operations as the most challenging to manage
PRIVATE DEBT AND ALTERNA- TIVE ASSET CLASSES WERE CITED BY THE BUY-SIDE AS THE MOST OPERATIONALLY COSTLY TO MANAGE.
53 %
Believe private equity investments are the costliest to manager
Operations for alternative investments are the costliest to manage, according to a new survey of 100 European buy-side heads of operations. Around 60 % of respondents to a survey conducted by SimCorp and WBR said private debt operations are the most challenging to manage in-house, and over half said alternatives operations were the most costly to manage. Of this, 53 % of buy-side heads of operations found private equity the most challenging to support, despite the asset class being one of the fastest growing over the past two years.“ Alternative investments are challenging to manage, particularly because the data, characteristics and market factors vary significantly from traditional asset classes. Researching private equity and hedge funds can be time consuming and expensive because market data is not readily available,” says Hugues Chabanis, product manager, alternative investments, SimCorp.“ Interestingly, the long-term make-up of alternatives investments often outlives the technology systems managing them, leading to a constant refinement of manual workarounds to cope with the reducing functionality of best-of-breed systems.” Chabanis added the heavy burden to manage these operations will no longer be justifiable, and buy-side firms will need an organisation-wide approach to manage these assets for the long-term. The cost in managing these strategies follows the recent growth for private equity and hedge fund administrators that provide operations outsourcing services.
Research from eVestment showed the private equity administration industry grew over 18 % in 2017 with assets reaching $ 2.5 trillion.
91 %
Of heads of operations are reducing manual processes
14 Global Custodian Summer 2018