The rate at which private equity firms are looking to outsource parts of their operations continues to increase. This is according to Ocorian, a global leader in corporate and fiduciary services, fund administration and capital markets, which this year has seen a significant increase in enquiries from private equity firms looking to outsource when compared to the same period in 2021.
In particular, it’s predicting a dramatic increase in US based private equity funds outsourcing, where increased scrutiny by regulators who have warned the industry to expect more fines and enforcement actions for overcharging investors, is stretching in-house compliance teams, and causing GPs to reassess.
Mary Bruen, Regional Head of Fund Services, Jersey, Guernsey & Isle of Man, Ocorian said: “Done right, outsourcing fund administration duties to a third party can be part of the solution to gaining a competitive advantage and delivering enhanced value to investors.
“For general partners, the decision to outsource really comes down to three things: evaluating the real cost of running their business; anticipating the impacts of changing regulatory and investor requirements; and choosing an effective end to end operating model that best serves their future business needs.
“Whilst the outsourcing model is very familiar to the European market, it is still comparatively new to the US market where there is still some way to go before many GPs feel comfortable relinquishing the control and direct oversight they have over their administration.
“However, on both sides of the Atlantic, we are now seeing a greater expectation that the fund manager focuses on its core areas of expertise rather than getting distracted by ancillary functions.
“GPs needs to focus on their client relationships at one end and on maximising the value of its assets at the other. The challenge is that in between those two pillars, there is an awful lot of hard work that needs to be done. They must decide whether to take on that complexity itself, which can be costly and a headache, or rely on third parties with a depth of understanding of the underlying asset.”
Ocorian says GPs having to increasingly handle ever larger volumes of data is also fuelling the outsourcing trend. It says there is great interest in deploying technology to make everybody’s lives easier, but deploying it effectively is invariably expensive. Increasingly managers are deciding to leave the running of operations to experts that can spread the cost of that technology over many clients.
Ocorian has provided a safe pair of hands for private equity fund managers and institutional investors for nearly 50 years, enabling clients to leverage our global network of offices through a single point of contact in a time zone that makes sense for them. Using innovative technology, Ocorian designs robust, scalable and user-friendly solutions to meet the needs of both global and boutique private equity GPs and LPs.
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