Shifting Technology Trends in Private Markets

Featuring Tarek Chouman from eFront, part of Blackrock

As allocations continue to shift towards private markets, investor expectations — shaped by their experience in public markets — are for greater efficiency, better transparency around data, and the ability to manage their whole portfolio on one platform. Tarek Chouman, Global Head of Business Development at Blackrock, sat down with Sensus Magazine to explain the shifting demands.

Traditionally, private markets have lagged public markets when it comes to data availability. In parallel, ESG moved to be universally acknowledged as a value creation driver, and sustainability arrived at the heart of the investment process. This development also contributed to the industry’s strong demand for data, with a specific focus on sustainability metrics.

The industry has often had to contend with a proliferation of systems, a lack of agreed-upon standards for reporting, and little or no inter-connectivity between asset owners, asset managers and providers to share data. As asset servicers compete to win business, we see them increasingly harnessing technology to meet these challenges.

Chouman sees four key trends that are currently shaping the technology landscape across private markets: Outsourcing, automation, sustainability, and a holistic portfolio view.

Outsourcing

Outsourcing has been a growing trend in alternatives for some time. This trend has been accelerated by the pandemic and the sudden need to work remotely. Asset managers have come to realise their need for technology that enables them to operate more effectively with their asset servicer. And, where traditionally asset managers selected asset servicers based on industry expertise and track record, the focus has increasingly shifted to which technologies are used by the asset servicer and how.

This shift is driven by the need to operate at scale and deliver at speed. Over the past years, private markets are becoming similar to public markets with larger funds and more investors, requiring more frequent reporting and deeper datasets.

This has created a need in the market for platforms that can support these requirements as a matter of course. 

Automation

This rising demand for high quality data, deeper data sets and more frequent reporting in private markets have given rise to automation in reporting and data analysis. Automation can radically improve how we collect and organise thousands of documents containing unstructured data. Early iterations of these automation capabilities decrease the time-to-delivery of quarterly reports by reducing how long it takes to transform the unstructured data into digitised and standardised spreadsheets with actionable knowledge. Automation can also reduce error rates and manual verification requirements, thereby improving the efficiency of the entire quarterly reporting process.

Increasingly sophisticated automation tools supplement the specialised data teams enabling round-the-clock education and guidance on the meaning and accuracy of the data. The result is greater confidence in the data and faster as well as more accurate analysis.

Sustainability

We see vast new opportunities and needs for private market investors to monitor and analyse portfolios and investments through an Environmental, Social, and Governance (ESG) lens. Asset managers require technology that can overcome and transform the industry’s limited, incomplete, and unstandardised sustainability data. 

There is an ever-increasing number of new market entrants around this topic. Today, however, the solutions available can largely be thought of as either technology firms providing operational solutions or data providers looking to unlock value. The trend is towards an out-of-the-box ESG monitoring and reporting solution that facilitates greater transparency, benchmarking, and progression towards providing a more sustainable future across the entire investment universe. 

M&A and strategic partnerships will continue, aimed at providing the most comprehensive and meaningful ESG data both efficiently and effectively across the entire fund investment lifecycle. The best providers of ESG solutions will enable clients to quantify and manage the impact of climate and transition risk as well as other sustainability factors on their financial assets. 

Whole Portfolio View

The increased blending of private and public market investing has given rise to the need for technology that allows asset owners to access portfolio data from private and public markets in one single view and understand the risk exposures and common factors underlying those exposures across their portfolios. With an integrated platform, asset owners can have a holistic understanding of performance drivers down to the single asset level and act with greater clarity and efficiency. Using a whole portfolio solution generates efficiencies by unifying the operational logistics and workflows of different teams specialised in different asset classes and giving them access to the same source of data and a consistent view of risk and return across the board. 

Technology-Enabled Integration

The four key trends around increased outsourcing, the rise of automation, the integration of sustainability in the investment process and the need for whole portfolio solutions have changed attitudes towards technology and the pace of innovation in our industry. They are paving the way for much closer, technology-enabled integration between asset owners, asset managers and the asset servicer community. 

There has never been a better opportunity to leverage fast-developing technology to create innovative investment and operating models built around greater data transparency and availability as well as speed and scale.