As automation allows private equity firms to achieve scalability, the tightening of data governance processes behind the technology becomes indispensable. Further, best-in-class operating models are becoming more accessible to smaller organisations.
“As the industry grows and the inflow of capital increases, firms are increasingly looking to scale,” outlines Travis Broad, director, private markets at Lionpoint Group, “this leads them to identify areas of resistance around manual processes that consistently require more and more people to action.” Hence, the need for automation is elevated. There is also an abundance of new and exciting technologies that seek to automate operational areas of private equity firms.
This signifies somewhat of a sea change in the industry, given that historically, private markets tended to be generally inconsistent in their approach to operations and technology. “Today, as we discover more transparency across the market, there’s a better view of what good looks like. This means that while operating models were formerly based on adapting technology around current processes, there’s more of a drive towards industry best practice,” Broad observes.
In addition, the explosion of data has increased the need to fundamentally re-visit approaches to implementations or selection processes which underpin operating model designs, Broad says: “While in the past, clients have selected and implemented systems largely in siloes, they’re now looking at identifying the right solutions for their wider business and considering the downstream impact of where this data will be used.”
Broad expects private equity managers will have to contend with a more sizable impact resulting from regulations, like IFPR or SFDR, as more capital pours into the industry: “This means reporting capabilities needs to be systematised. This way, the additional reporting requirements should not increase the ongoing reporting burden.”
According to Broad, increasing dry powder, multi-fund administrator models, and the growth in private credit opportunities all drive the needs for more accurate liquidity management. In view of this, understanding how these processes fit within an organisation is increasingly important.
“As we start seeing more volatility in market with recent events, our clients need deeper insights into the impacts on their portfolios,” Broad explains when outlining the outlook for the industry, “we see the ability to offer these insights with scenario modelling capabilities, to truly unlock access to the value behind the data, as vitally important to our growth.”
From its perspective, Lionpoint looks look forward to expanding its team to bring on board skillsets to cover the ever-expanding market. “As the industry continues this march towards best practice, there’s more of a blueprint for success, which makes best-in-class operating models more accessible to smaller organisations,” Broad says, “Firms are more inclined to approach technology early and get scaled with it in place – by commoditising the analysis involved in reviewing an organisation’s operating model according to a structured profile, it allows for five-year roadmaps to be set out early in the lifecycle of a business.” 
