Private markets in flux: five key takeaways from Ocorian’s first Dallas Breakfast Club

On June 24th, Ocorian's Dallas team hosted a panel discussion, bringing together private market leaders to delve into the evolving fund landscape. Moderated by Lynne Westbrook, Head of Fund Services at Ocorian, the event featured insightful contributions from Steve Menna, Partner at Withum, Burke McDavid, Shareholder at Winstead, and Jason Anderson, Founder at Edgepoint.

The Dallas Breakfast Club highlighted that while the private markets are undoubtedly in flux, one truth remains clear: operational excellence has become a strategic imperative. Our recent research underscores this, revealing that only 8% of fund managers believe their operating model is truly fit for purpose. Furthermore, a significant 83% expect increased regulation and 88% anticipate more scrutiny on valuations.

Here are five key takeaways from the discussion:

1. Pressure is mounting across the board

The panel highlighted that fund managers are facing intensified pressure from multiple angles. Investor risk aversion, heightened due diligence and regulatory uncertainty are significant hurdles in capital raising. As Steve Menna noted, "The challenges that managers are having as far as raising capital, it's just increasing the level of scrutiny." Jason Anderson added that the sheer "amount of data and reporting that you need just to start conversations has grown over these last few years, even mostly post-COVID." Operational leaders are now tasked with achieving more with fewer resources, all while under greater scrutiny. This environment is driving managers to adapt, with Burke McDavid observing a shift towards "more SMAs (Separately Managed Accounts), a lot more sort of special purpose fund investment fund vehicles."

2. AI is here, but governance is lagging

The adoption of Artificial Intelligence (AI) in private markets is undeniable, with 64% of GPs reportedly using AI for due diligence and 61% for portfolio analytics. Jason Anderson confirmed this, stating that "document review is being used right now." However, the discussion revealed a significant hurdle: 54% of managers believe internal governance is slowing adoption. As Burke McDavid eloquently put it, firms are still "finding the right balance between AI and human steerage." The potential risks, such as "hallucination" (AI generating inaccurate information) or privacy concerns when handling client data, necessitate robust internal policies. Steve Menna stressed the importance of "guardrails" around AI usage, particularly when facing regulatory reviews: "When you're utilising AI you better have your guardrails, your documentation surrounding how you're using it, who has access—all that sort of thing."

3. Only 8% say their operating model is fit for purpose

The statistic that only 8% of fund managers are confident in their current operating model paints a clear picture of the industry's need for transformation. Legacy systems and fragmented data continue to be major impediments. Jason Anderson highlighted the persistent challenge of achieving a "single source of truth," noting that LP requests often demand "different grain and levels of detail that are connected to certain data points that we never thought to capture or stored." This constant need to adjust data sets and reports underscores the operational inefficiencies plaguing many firms. The consensus is that major redesigns are needed within the next 12-18 months to build more robust, data-ready operating models.

4. Outsourcing is rising, and expectations are too

The trend towards outsourcing shows no signs of slowing, with 81% of GPs expecting to increase their outsourcing activities. This is particularly true for closed-ended funds, which still offer significant "green field" for outsourcing compared to the already highly outsourced hedge fund space. However, the panel agreed that the bar for fund administrators is significantly higher. Value-add now extends far beyond mere cost savings. As Steve Menna emphasized, the "interconnectivity from your CPA firm to your admin firm, even from a brokerage attorneys, that sort of ecosystem and making sure that's a good group that works together that's transparent" is crucial. The discussion reinforced that successful partnerships are built on strong relationships and a shared commitment to operational excellence. Burke McDavid added that it's about finding "people that know your business and that care about your business and are thinking about your business."

5. Talent + tech = tomorrow's edge

Ultimately, the future belongs to firms that strategically invest in both scalable technology and human-centered operating models. Whether the conversation revolved around co-sourcing, AI, or investor reporting, the underlying theme was the critical interplay between skilled talent and advanced technology. The ability to integrate these elements effectively will be the differentiating factor for firms seeking a competitive edge. This includes having a "good hygiene" around data and documents, as Burke McDavid pointed out, making sure they are "scrubbed" and accurate, especially with AI tools scrutinizing them quickly.

How can Ocorian help?

Navigating the intricacies of private markets demands a partner with deep expertise and a global reach. Our US teams are dedicated to helping you overcome operational complexities, enhance governance, and seamlessly expand into new markets. With direct access to leading structuring and fund domiciliation hubs across the US, Europe, the Middle East, the Caribbean, Africa, and Asia Pacific, we offer a central point of contact to leverage our extensive global network and support your unique structuring needs.

Contact our team today.