Private capital fund managers will spend several billion dollars so they can provide daily performance reporting and meet other transparency demands in the next five years, research suggests.
Transparency demands extend to ESG reporting, cybersecurity and service level agreements and stem from a wider range of investors, such as pension funds, entering private markets.
Two thirds of more than 300 CFOs at private capital funds globally expect investors to want daily or live updates on performance. Intertrust Group, which sponsored the research, estimated $5.5 billion would need to be spent by firms to reach service standards expected by institutional investors.
In a report (‘The future private capital CFO: Evolving in a digital age’), Intertrust said CFOs at private capital funds expected clients to require data updates with increasing frequency over the next decade.
A quarter of the CFOs, the largest cohort in the survey, said they would respond with more investment in technology. Other measure include increasing the size of in-house finance teams, outsourcing more functionality, and greater usage of distributed ledger technology.
Yet the measures are also “conflicting with private capital funds’ traditional leaning towards confidentiality, said Chitra Baskar, chief operating officer and global head of funds and product at Intertrust, which is a specialist fund administrator.
“Traditionally, private capital fund managers have tended towards keeping a lot of information confidential because of the nature of their deals. But more mainstream investors who are used to having more data are coming into the market because of the higher returns available. Their appetites for data disclosure will drive the need for the delivery of faster and more detailed reporting.”
Baskar said hedge funds had already transitioned and now private capital funds must catch up. Private capital funds must either meet the greater demands or face significant competitive disadvantages and possibly regulatory pressures.
*Funds Europe looks at how specialist fund administrators have similarly had to cope with a greater level of institutionalisation to support their private markets clients over the past decade:
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