From navigating an ever-changing regulatory landscape, to responding to investor information requests during times of market stress or turmoil, having the right software solutions in place is crucial for both established and emerging private equity managers, says Yuriy Shterk, chief product officer, Allvue Systems.
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From navigating an ever-changing regulatory landscape, to responding to investor information requests during times of market stress or turmoil, having the right software solutions in place is crucial for both established and emerging private equity managers, says Yuriy Shterk, chief product officer, Allvue Systems.
Are there upcoming regulatory updates which could affect your business and that of your clients?
As regulation of the private equity industry grows and evolves, the need for systems to provide better control and insights increases, as does demand for solutions like Allvue’s. It’s harder to comply with regulators when you rely on Excel for your back-office operations, or when you don’t have a purpose-built compliance solution in place. As regulatory requirements keep growing, our clients and potential clients will feel the need to have their funds supported by powerful software which cuts down on errors and makes data easily accessible.
What are the primary challenges your firm and your clients are facing and what is critical to these being overcome?
Emerging managers face many challenges as they find their footing. Hiring teams, establishing and executing their investment strategy, security investors and deals – the last thing they want to think about is technology. Because of this, many go to fund administrators for their accounting and reporting or use Microsoft Excel when they can’t. Allvue gives them a way to solve all of these issues in one simple decision and gives them complete control over their data and tech.
Another big challenge facing emerging managers is seeing past the current volatility triggered by the banking sector problems and understanding how developing news is impacting both their firms and their portfolio companies. When a crisis hits, the ability to quickly access and understand your firm’s data across the investment lifecycle is key. If your firm runs its business operations on Excel, that’s much harder to do.
Are there obstacles which are specific to emerging managers and how have you been working around them?
Emerging managers often struggle to identify what their mix of insourcing and outsourcing should look like. They’re working with a small and nimble team responsible for covering a lot of ground. When it comes to elements like back-office activities, outsourcing is especially attractive so that small teams can stay focused on investment strategy and generating returns. By using a fund administrator and benefiting from their back-office expertise though, managers lose out on choosing their own back-office software, holding their data within their own systems, and being able to access that data when their investors ask one-off questions.
These elements have a very direct impact on the investor experience – something that’s crucial for managers to master as they grow. Allvue’s co-sourcing arrangement allows emerging managers to purchase our licensed back-office software, which can then be used by a fund administrator of their choosing for accounting and investor reporting activities.
What is your outlook for the sector in which you operate for the coming year and how is your firm best placed to support clients to navigate the environment?
During traumatic market events such as the global pandemic, or the recent banking sector turmoil, GPs have realized the value of software like ours. In moments of crisis, the ability to access reliable business data quickly and efficiently, to provide investors with insights into the impact of events on their investments, is critical. As previously mentioned, when an investment strategy is run entirely on Excel, that’s hard to do. This is even more true for emerging managers, with smaller portfolios and very focused strategies that are naturally harder to diversify when compared to the largest players in the industry.
Do you see the industry changing fundamentally over the course of the medium to long term? Are there any trends which have been given over inflated importance?
Private equity has had several recent hurdles and a rough entry to 2023. But ultimately, I don’t think any of this changes the medium to long term outlook for the industry. Growth has been steady for decades. Regulators are increasingly viewing private capital as its own asset class and putting up the necessary guardrails. Competition among managers is healthy. The investment lifecycle is long. The technology market continues to put out cutting-edge, purpose-built alternative asset software. All this suggests the foundations are stable, emerging managers will flourish, and the industry will keep growing.
Yuriy Shterk, Chief Product Officer, Allvue Systems – Yuriy has served as Allvue’s Chief Product Officer since 2020 and has over 20 years experience working in different functions for technology solution providers in Capital Markets. Most recently he worked as Head of Product Management at Fidessa Inc and managed the build out of its derivatives trading OEMS for global financial institutions as well as the execution and analytical tools for global FCMs. Prior to that, he oversaw product development and product strategy at CQG Inc. Yuriy holds a Bachelor of Science from the University of Colorado in Computer Science and a Bachelor of Science from Tashkent Technical University in Computer Engineering.
