Modernizing Alternatives Executions Management

January 27, 2022
Lata Vyas explores how managers can automate to achieve a bird’s eye view of executions across their portfolios, facilitating investor access to private market assets.

Today’s asset management businesses typically operate numerous investment portfolios, with front-office managers executing trades across multiple markets globally. Scaling a business with disparate executions across portfolios can be tricky.

Executing transactions in non-standardized private markets adds an additional level of complexity to this already fraught picture. Asset managers in these markets work across multiple third-party administrators (TPAs) and often have different systems to manage their various strategies. Traditional firms are not off the hook - with the rise of hybrid fund structures to furnish traditional investors with alternatives-type returns profiles, few firms can avoid the challenges of alternatives executions management.

The good news is that whether you’re a major integrated asset manager trying to make sense of disparate executions across portfolios, or an alternatives boutique manager looking to develop a rational operations model, you can modernize executions to scale your business.

We have experienced that such an evolution happens in three streams, by:

1. Digitizing interactions, building interoperability and creating transparency between stakeholders using workflow tools

Digitization is essential in today’s remote working environment as managers grapple with completing due diligence checks remotely. In the high value private markets, where managers fiercely compete to gather the best assets, they face increasing pressure to complete the due diligence process quickly while continuing to operate within their risk and compliance framework.

The use of digital libraries for document review gives managers the flexibility to undertake due diligence on potential investments across various functional groups such as portfolio lead, compliance and legal. These libraries are also helpful when due diligence is outsourced to third party specialists or consultants, enabling the relevant parties to share the same set of documents.

Workflow tools are an integral part of the digital tool kit and could transform private markets investing by streamlining processes across the front, middle and back offices. They digitize interactions between parties, bringing a level of straight through processing normally associated with liquid public markets, creating the transparency managers need to gain comfort with the end-to-end process of a deal closing.

For example, a single digital execution instruction for a private debt instrument generates the associated cash movement down the fund structure, as well as the loan forecast model for the life of the instrument and triggers the subsequent loan and interest accrual transactions in the accounting records of the fund. This level of digitization requires a set of technology tools that support the flow of open architecture data between various systems both internal and external; from the front office systems used by the manager to the accounting systems used by a third-party administrator.

2. Capturing data, aggregating and augmenting it to enable self-servicing 

Having to make a decision from a plethora of tools and fintech providers which can best support open architecture data flows between multiple systems and platforms, is no mean feat. But, as with many issues, the best place to start is by self-examination.

Managers face the complex task of streamlining across multiple silos and different private market strategies and teams, with the multiple legacy systems that evolve in these teams. While understanding the rationale of Chinese walls or functionalization of certain key functions, using data more efficiently and fluidly can go a long way in managing operational overheads as managers continue to see fee compressions.

To add to the complexity, many managers are looking to widen the accessibility of private market assets to retail investors via new structures such as the European long term investment fund (ELTIF), the proposed long term asset fund (LTAF) as well as an increasing number of evergreen private market funds. These hybrid funds require a blending of private and public market functions and teams which can be challenging.

This complexity heightens the need for tools that support data aggregation at a level never seen before, blending investor data from distributors or trading platforms with investment data held in systems historically used for closed ended private markets funds.

Augmenting data at will

As strategies and teams blend and merge, there is an increasing need to support core data sets that are capable of being augmented almost at will, with reporting or dashboarding tools that can also flex quickly. Self-service requests are also starting to appear from limited partners (LPs), who are looking for more transparent reporting to support their regulatory reporting requirements.

Managing investor reporting demand can be a conundrum for managers who use multiple service providers to service their fund structures, as they attempt to consolidate multiple data sets. While established asset manager shops prefer to receive data feeds that they can consolidate and present internally in their own reporting environment, for a start-up or a small manager there is a greater reliance on data tools provided by their service providers.

For this reason, technology is an important factor for selecting a fund administrator or transfer agent. In addition to providing a digital portal for investors to access fund reporting, increasingly managers are also looking for a portal access which would provide transparency into fund activity, the ability to review and approve transactions, as well as the ability to review and extract investor and accounting data that can feed into their front office systems.

Another key differentiator when selecting a service provider is the ability to provide a single platform that can aggregate data from multiple TPAs.

3. Easing data usage with customizable apps, enabling stakeholders to focus on value

In the race to present data sets in a quality-controlled environment, and with an ever-increasing number of consumers of data, ease of use plays a key role. For an asset manager, data demands can arise from not just the external clients or investors but also internally from the investor relations teams, fund controller office, risk and compliance oversight functions or management companies.

Each have their own specific requirements so for these divergent groups of stakeholders, easy access to quality data can go a long way in freeing them up to focus on value addition, without the burden of replicating and maintaining information in each group.

In this case, greater customization and clean app-based dashboards can bring a level of modernization to alternatives through automation. Data reporting in alternatives is on the cusp of a major shift with both fintech companies, as well as service providers, in a race to design customizable app-based tiles and dashboards, with drill down capability that can provide information at a user’s fingertips.

Graphical user interfaces and visualisations that can support transparency into a fund’s portfolio supported with reliable data sets, can help managers meet the increasing pressure from their investors and regulators.

With the increasing flow of capital to alternatives, managers are launching more creative and attractive products, as they vie to attract investors with the best assets. Those with a bird’s eye view of executions across their portfolios, made achievable by a service partner with a robust technology platform and digital tool kit that can support transparency and oversight, will be the earliest in catching the worm.   

Big data abstract visualization: waves on surface of the sea of information
Up Next
Up Next

Automating Private Markets With People at the Core

January 13, 2022
In this series, we explore how automation can enable firms to scale by giving technology toolsets to subject matter experts to develop use cases for the low volume, non-standardized servicing activities.


Brown Brothers Harriman & Co. (“BBH”) may be used as a generic term to reference the company as a whole and/or its various subsidiaries generally. This material and any products or services may be issued or provided in multiple jurisdictions by duly authorized and regulated subsidiaries.This material is for general information and reference purposes only and does not constitute legal, tax or investment advice and is not intended as an offer to sell, or a solicitation to buy securities, services or investment products. Any reference to tax matters is not intended to be used, and may not be used, for purposes of avoiding penalties under the U.S. Internal Revenue Code, or other applicable tax regimes, or for promotion, marketing or recommendation to third parties. All information has been obtained from sources believed to be reliable, but accuracy is not guaranteed, and reliance should not be placed on the information presented. This material may not be reproduced, copied or transmitted, or any of the content disclosed to third parties, without the permission of BBH. All trademarks and service marks included are the property of BBH or their respective owners.© Brown Brothers Harriman & Co. 2022. All rights reserved. IS-07869-2022-01-13

This browser is not fully supported by our public website and may not display or function as expected for this reason. Please note, the Infuse Portal and BBH client applications fully support the IE 11 browser.

Important Information for Non-U.S. Residents

You are required to read the following important information, which, in conjunction with the Terms and Conditions, governs your use of this website. Your use of this website and its contents constitute your acceptance of this information and those Terms and Conditions. If you do not agree with this information and the Terms and Conditions, you should immediately cease use of this website. The contents of this website have not been prepared for the benefit of investors outside of the United States. This website is not intended as a solicitation of the purchase or sale of any security or other financial instrument or any investment management services for any investor who resides in a jurisdiction other than the United States1. As a general matter, Brown Brothers Harriman & Co. and its subsidiaries (“BBH”) is not licensed or registered to solicit prospective investors and offer investment advisory services in jurisdictions outside of the United States. The information on this website is not intended to be distributed to, directed at or used by any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. Persons in respect of whom such prohibitions apply must not access the website.  Under certain circumstances, BBH may provide services to investors located outside of the United States in accordance with applicable law. The conditions under which such services may be provided will be analyzed on a case-by-case basis by BBH. BBH will only accept investors from such jurisdictions or countries where it has made a determination that such an arrangement or relationship is permissible under the laws of that jurisdiction or country. The existence of this website is not intended to be a substitute for the type of analysis described above and is not intended as a solicitation of or recommendation to any prospective investor, including those located outside of the United States. Certain BBH products or services may not be available in certain jurisdictions. By choosing to access this website from any location other than the United States, you accept full responsibility for compliance with all local laws. The website contains content that has been obtained from sources that BBH believes to be reliable as of the date presented; however, BBH cannot guarantee the accuracy of such content, assure its completeness, or warrant that such information will not be changed. The content contained herein is current as of the date of issuance and is subject to change without notice. The website’s content does not constitute investment advice and should not be used as the basis for any investment decision. There is no guarantee that any investment objectives, expectations, targets described in this website or the  performance or profitability of any investment will be achieved. You understand that investing in securities and other financial instruments involves risks that may affect the value of the securities and may result in losses, including the potential loss of the principal invested, and you assume and are able to bear all such risks.  In no event shall BBH or any other affiliated party be liable for any direct, incidental, special, consequential, indirect, lost profits, loss of business or data, or punitive damages arising out of your use of this website. By clicking accept, you confirm that you accept  to the above Important Information along with Terms and Conditions.

 
1BBH sponsors UCITS Funds registered in Luxembourg, in certain jurisdictions. For information on those funds, please see bbhluxembourgfunds.com


captcha image

Type in the word seen on the picture

I am a current investor in another jurisdiction