A seat in the heart of the private capital community
Allocations to alternative asset classes, like private capital, have risen sharply in the past two years. As the interest in such investments broadens to include retail clients, managers are facing growing regulatory and administrative burdens as calls for increasing transparency and reporting become more insistent.
Against this background, Luxembourg has successfully built a tight-knit community of experts in the private equity and real estate (PERE) arena. As the world adapts to promote further digitisation and greater efficiency in these asset classes, providers looking to support these players are turning to the Grand Duchy as a centre of excellence.
AssetMetrix is one such firm, having opened its Luxembourg office in August 2021. “Luxembourg is a key strategic and international centre when it comes investment funds, and even more so in the private equity and real estate segment,” notes Alexander Wedlich (pictured), Head of Business Development Luxembourg, Belgium and France, “this is thanks to its ‘toolbox’ for structuring deals and having built a core of expertise among the service providers present in the country.”
AssetMetrix aims to drive digitisation, standardisation and automation in the private capital arena through its innovative modular outsourcing solutions. These include front-, middle- and back-office offerings for limited partners, general partners and their service providers. The firm seeks to position itself as an essential private capital service provider and fully integrated trusted member of the thriving Luxembourg PERE eco system.
Managers are facing increasing client demand for more transparent reporting and more in-depth analytics to track the performance of their investments. This, coupled with the growing regulatory burden requiring greater reporting, highlights the need for the services firms like AssetMetrics provide.
“Digitisation, standardisation and automation of the processes is one part of the solution to help clients overcome the concerns they are currently managing,” explains Wedlich, adding how scarcity of resources in the form of the right candidates in the operations, risk and IT space is also leading to increased demand for managed services.
Wedlich outlines the critical advantages of the wave of digitisation which continues to capture the PERE industry, having been accelerated by the Covid-19 pandemic: “Through such exercises, clients can free up staff and systems, allowing them to concentrate on core or value-added services. This includes astute investment selection, in the case of asset managers.”
They also benefit from reduced time to market and lower regulatory and market risk. Adopting such services also tends to be well-received by investors, providing clients with a positive marketing exercise to perform.
Having a single source of truth as a data management model would also be a key advantage for clients. AssetMetrix takes over the laborious task of inputting all of the data relevant for clients’ portfolios. All information is validated and stored centrally within a "Single Source of Truth” system.
From the firm’s perspective, AssetMetrix has continued to invest in technology and staff to ensure its service grows to meet clients’ changing needs. “We aim to respond to current client requirements and trends and also to anticipate future demands by building truly unique, analytical solutions,” outlines Wedlich.
ESG - a development here to stay
One of these solutions includes an ESG offering as this approach to investment rapidly makes it ways into the private capital arena. The growth of ESG in the space however presents a few challenges. Wedlich comments: “Investors’ expectations are growing to new heights, they demand more transparency on GPs’ ESG activities and how responsible investment practices are being implemented throughout the investment life cycle.”
Furthermore, regulators demand action as the Sustainable Finance Disclosure Regulation (SFDR) comes into force in Europe. This is made more difficult by the fact that the process of data exchange between portfolio companies and other stakeholders remains highly manual and inefficient.
In view of this, AssetMetrix seeks to support this development by providing tools to overcome these obstacles. The firm’s ESG solution applies structure and organisation to everything related to ESG Management. This allows managers to perform a whole host of tasks ranging from simple providing ESG reporting to their LPs/investors to managing their ESG risk or creating an impact with their investment.
Such a solution also simplifies and automises the data exchange process while enhancing data collection through the application of recognised frameworks such as the Sustainability Accounting Standards Board (SASB) and the UN Sustainable Development Goals. Managers in the private capital space will also be able to deliver customised ESG reports to investors frequently, through digital portals or in a PDF format.
“ESG is not just a trend,” Wedlich asserts, “It is a future mandatory or mainstream process, which is why managers need to get ahead of this development and put systems in place to manage the growth in this area.”
More broadly, alternative investments are generating performance and attracting a growing number of investors. The asset classes are no longer reserved for institutional clients but are also available to the retail market. This, explains Wedlich, will inevitably lead to increased regulation and reporting requirements.
In order to meet these rising pressures, digitisation is no longer optional – it is a must. “This exercise will first serve to address cost saving, resource constraints and risk issues. Eventually, it will transform the entire value chain,” Wedlich concludes.