By Sumit Gupta
Co-Founder and Managing Director, Oxane Partners
Private market investment firms prepare themselves as the market continues to grow.
Private markets have been growing considerably over the past decade and a half, spurred on by multiple tailwinds. Driven by investor interest for higher yields, and more diversification, private markets (and notably private credit) have emerged as one of the most promising asset classes in the last few years. As investors continue to increase their allocation to private transactions, questions around investment firms’ processes, systems, and preparedness to handle a black swan event looms large. As these developments unfold, investment firms are (re-)evaluating their technology and digitalization roadmap that would allow them to continue to scale up with ease.
Testing the status-quo
These last few years have put to test investment firms’ processes, systems, and preparedness whether to mitigate disruptions brought on by the pandemic, support evolving regulatory compliances, report for ESG considerations or support the expansion of investment strategies. For investment managers, it is worth reflecting on how quickly their processes and systems were able to adapt to these. Where did they do well? Where did they fall short? Did their teams’ operational demands increase? And most importantly, how confident are they that their current systems, processes, and partners will be able to support them in the coming years without causing any disruptions?
Is NOW the time to (re-)evaluate?
Newer technologies like machine learning and generative AI have had investment firms sit up and take notice of how to drive further value across the investment lifecycle. Tech-savvy investment firms are already reimagining how leveraging AI/ML-powered solutions could transform their investment operations – from enabling straight-through data processing, and process automation, eliminating manual errors, enabling better analytics, and more, freeing up teams for higher-value activities and driving efficiency across the firm. As firms gear up to scale up their investment book, the focus on aligning operations to deliver efficiency and profitability has become paramount. Instead of having technology as an afterthought, firms are now taking a ‘technology-first’ approach to ensure they are future-ready as the market landscape continues to evolve rapidly and present more opportunities.
So, what are the fundamental considerations?
As firms ready themselves to put up a plan or revisit existing plans, it is critical to evaluate the considerations when going for an external digitalization solution. Investment firms are now increasingly looking for ‘specialist solutions providers’ that can help them move fast, without the need for handholding. Such firms, typically, also have a strong team of domain experts to add that extra edge to the investment operations and pave the way for a successful digital transformation. Another key consideration investment firms look for is to go with solutions that have the widest coverage of private market asset classes – across debt and equity, and hard and financial assets, with support from ‘cradle to grave’. This allows them to be ready to support newer investments as strategies evolve.
Evaluating and planning a digitalization strategy is always a monumental challenge, but firms know it can’t be ignored if they are to scale up and capitalize on the market opportunities. These considerations, amongst others, can function as the guiding compass for investment firms’ journey to drive operational efficiencies, set up for scale, and become future-ready, in the evolving private markets landscape.
Sumit Gupta, Co-Founder and Managing Director, Oxane Partners – Sumit co-founded Oxane Partners, a leading technology-driven solutions provider to the private markets industry globally. Sumit has over 25 years of investment banking and fintech experience across London, Singapore and Mumbai working with Deutsche Bank, BNP Paribas, Reuters and ICICI Bank. Sumit leveraged his fintech roles implementing trading and risk management solutions for banks in the Asia Pacific region and structured credit trading experience in London and Mumbai to conceptualize and develop pathbreaking financial technology solutions for global private markets. Sumit holds an MS in Computational Finance from Carnegie Mellon University and an MBA in Finance from Indian Institute of Management Calcutta.