A majority (62 per cent) of private capital fund managers in the UK, Europe, North America and Asia will increase the amount of automation and new technologies used to administer their funds over the next five years.
A majority (62 per cent) of private capital fund managers in the UK, Europe, North America and Asia will increase the amount of automation and new technologies used to administer their funds over the next five years.
According to a new global study commissioned by Intertrust Group, of these, over two thirds (67 per cent) said they plan to invest in Big Data capabilities while just under two thirds (63 per cent) expect to invest in distributed ledgers such as blockchain.
The study, The Future of Fund Technology, found that business size is key in shaping technology investment decisions. Nearly half (47 per cent) of those with AUM of USD3 billion or more stated that it is “very likely” that they will invest in more automation and tech over the next five years. A majority (90 per cent) said they were also more likely to pioneer new technologies and work to utilise new technological advances as soon as they become available.
This compares to only 9 per cent of those with AUM of between USD259 million to USD500 million. Less than a third (31 per cent) of these managers said that they would only use new technology if there was no other choice while around a quarter (27 per cent) of those with AUM between $500 million to USD1 billion state that they would only invest in technology if it was mandatory.
In addition, private capital firms with positive AUM growth forecasts are more open to new technologies than those with negative AUM forecasts – a third (33 per cent) compared to 15 per cent. Those with positive AUM growth forecasts are also more likely to expect to invest in automation and new technologies (cited by 78 per cent) than those with negative growth forecasts (38 per cent).
At a geographic level, US private capital funds are most likely to adopt new technology as soon as it becomes available (38 per cent), while over half (53 per cent) of European businesses adopt new technologies once it has been around for a while. Over one in four (28 per cent) Asian businesses use technology if there is no other choice while UK private capital providers are least likely to avoid technology that has not been cleared by the regulator (5 per cent).
Current technological advancements are mainly focused on investor relations and reporting (51 per cent), portfolio business intelligence (41 per cent) and portfolio accounting (40 per cent). Interestingly, 42 per cent of US respondents claimed that most of their processes are still run manually, whereas the UK and Europe rely more on automation.
The report concluded that most respondents (43 per cent) currently rely on third-party administrators (TPAs) to manage all fund-related administrative work, only looking in-house for select activities. Across all geographies, the average number of TPA’s used is two, while funds with over USD1 billion in AUM, tend to employ three.
Chitra Baskar, Chief Operating Officer and Global Head of Funds & Product at Intertrust Group, says: “We embarked on this tech-focused state of the private capital industry to better understand the way different global markets interpret and apply new technologies in the fund administration space. With respondents from some of the largest funds in the world calling out critical operational issues that can be solved by a deeper understanding and a greater investment in tech, we hope that through analysis, we will support our clients, finding ways to better streamline day-to-day fund administration — from regulatory upkeep to investor relations and anything in-between.”
“These findings highlight the adoption of new technology, and all of its associated costs is a challenge to many private funds. However, the majority of managers realise that they’re taking some risk by not optimising their business by considering the latest in tech innovation. It’s our job as global administrative partners to ensure we understand the needs across markets, for all of their nuances, so that funds have the necessary tools to remain competitive and the time to prioritise what matters most to them – the investor.”
