62 percent of survey respondents cite governance and controls as why LPs would select a GP
WINDSOR, Conn., May 4, 2017 /PRNewswire/ -- SS&C Technologies Holdings, Inc. (Nasdaq: SSNC) a global provider of financial services software and software-enabled services, today released a study that shows an increased focus on private equity operational efficiency. The data reveals that nearly all respondents (88 percent) reported being more operationally focused today compared to three years ago. The reasons behind this are varied, but ultimately map back to protecting investor interests. Governance and controls (62 percent), increased demands for transparency (53 percent), and a strong management team (85 percent) are all cited as leading factors for why limited partners would select a General Partner. The research was conducted by polling SS&C private equity customers as well as attendees at the 2017 SuperReturn International conference in Berlin.
Investor Demand for Transparency
The top reasons respondents cited for being more operationally focused include demands from limited partners (33 percent) and enhanced reporting requirements (22 percent). Investors are seeking separation of duties and built-in transparency to the accounting and reporting process. This helps to protect investors' interests within the framework of the limited partnership agreement and allows private equity firms to focus on their core competencies – the effective management of investments and safeguarding of capital.
Increased Regulatory Environment
Transparency will continue to be a focus for general partners due to increasing regulatory pressures. Governing bodies such as the IRS and SEC continue to keep a close eye on the industry and FACTA, OEC, and CRS guidelines ensure investors are not overcharged inappropriate fees or expenses. Nearly half of respondents (47 percent) ranked regulatory changes as the top factor expected to most impact private equity within the next year. While acknowledging the burden of these mandatory reporting requirements, only 17 percent of respondents cited changing regulations as the driver behind their increased focus on operations.
Increasing Complexity & Asset Class Growth
As asset classes continue to grow, 40 percent of respondents predict that credit and 35 percent of respondents predict that buyout/VC will be the top investment strategies spurring private equity growth in the year ahead. With an influx of capital lifting the overall assets under management, firms will require significant investment in people and technology to stay competitive. However, just 18 percent of respondents anticipate human capital management will have a major impact on the future of private equity in the year ahead. For small managers, an investment in human capital can be a major impediment to further growth; whereas, outsourcing this work to an administrator can provide immediate scalability. Equally, larger managers are also recognizing the virtues of outsourcing to administrators as their organizations become increasingly complex and diverse. A number of these managers are beginning to adopt hedge, credit, and other new strategies – something that is leading to blurred lines between asset classes.
While private equity continues to evolve towards using third party fund administration, SS&C is seeing a significant uptick in adoption – especially as investors and regulators look for additional independence of fund accounting and reporting activities. "These survey results confirm what we are seeing in the marketplace. A growing number of private equity organizations look to third parties such as SS&C to procure fund administration, operational, performance, investor reporting, regulatory, and other services," said Joe Patellaro, Managing Director, SS&C GlobeOp Private Equity Services. "As the world's largest fund administrator, we offer a unique combination of world-class service, expertise, and technology to meet this growing demand for complex solutions. We are well positioned to be a long term partner for the industry's continuously evolving needs."
The survey was conducted among SS&C customers as well as at the 2017 SuperReturn International conference in Berlin. Results are based on a seven-multiple-choice question poll of approximately 100 GPs, LPs and other professionals within private equity. Full survey results can be found here.
About SS&C Technologies
SS&C is a global provider of investment and financial software-enabled services and software for the global financial services industry. Founded in 1986, SS&C is headquartered in Windsor, Connecticut and has offices around the world. Some 11,000 financial services organizations, from the world's largest institutions to local firms, manage and account for their investments using SS&C's products and services.
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