Investors are looking for new sources of diversification and opportunities to earn stable cash flows beyond public markets. As a result, pension funds, insurers, family offices, and ultra-high-net-worth (“UHNW”) investors are increasing allocations to private equity, private credit, and real assets.
Meanwhile, wealth managers are bringing in new investors through evergreen structures and tokenised share class solutions. For insurers, the evolving Solvency II framework is also accelerating the process by improving the capital efficiency of private market and securitised investments.
What problems are allocators encountering as they increase their exposure to these asset classes?
The biggest constraint on allocators is now operational complexity.
Private assets need timely, accurate, and transparent data to support investment decision making, risk management, and regulatory compliance. Many allocators are finding that their reporting frameworks do not have the necessary scalability to deliver.
In public markets, data is generally consistent and readily available. In private markets, however, data is often fragmented, unstructured, and delayed. Integrating this data into investment governance, regulatory reporting, and risk management frameworks can be complex and time-consuming.
Allocators often lack the headcount and technology infrastructure to manage private assets. Instead, they rely on legacy systems designed for listed securities that struggle to ingest capital call notices, multi-jurisdictional special purpose vehicle structures, waterfall calculations, or look-through exposure data. It takes longer to complete core processes, such as reconciling valuations, monitoring liquidity and forecasting cash flows, while error rates increase.
Meanwhile, investment committees and regulators now expect detailed reporting on exposures, performance drivers, environment, social, and governance (“ESG”) and climate metrics, and risk analytics. Delivering this across multiple general partners (“GPs”), vintages, and strategies requires an integrated data model. Wealth channel distribution is also introducing retail scale transaction volumes that legacy administration systems were not designed to handle.
What are the implications of not solving reporting issues around private assets?
If investment committees, regulators, and beneficiaries do not receive granular, look through reporting on exposures, liquidity, leverage, and ESG/climate metrics, it will undermine oversight, increase operational risk, and weaken confidence.
In turn, this affects investment approvals, risk modelling, scenario analysis, and capital planning. These issues are particularly acute for insurers, pension schemes, and wealth platforms distributing private market products.
Describe the pros and cons of managing these processes in-house and via a third-party
Managing private markets reporting and operational processes in-house offers strong control and close alignment with the investment team. But it requires a lot of work.
Building an internal capability requires substantial investment in technology, data management, regulatory reporting, and systems integration. Investments in technology, cybersecurity, and regulatory expertise must be ongoing. This can be worthwhile for large organisations with established teams. But for many midsized allocators, the operational load can be prohibitive.
Allocators need modern data architecture and automation via a specialist partner capable of managing complex private markets data end-to end. Without this, operational complexity will limit their ability to increase allocations.
Specialist administrators bring deep private markets expertise and mature operational frameworks. They have asset class-specific technology to handle data ingestion, cash flow processing, net asset value oversight, and look-through reporting. This can reduce operational risk and accelerate reporting cycles. Building these capabilities internally takes time and considerable cost.
Outsourcing comes with its own challenges. Some allocators may feel a loss of immediacy or tailoring relative to what an internal team might deliver. Managing this requires careful oversight, clear service levels, and alignment on data standards.
Lastly, is there any requirement to produce ESG and climate reporting across holdings?
Regulators and investors have increasing expectations around ESG and climate related reporting across underlying holdings. This can be a real challenge, given data inconsistency across private markets.
Specialist platforms can help by aggregating and aligning ESG and climate data, allowing allocators to meet rising transparency requirements with confidence.
