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New research revealed over half of fund administrators (55%) are struggling with data acquisition and governance due to the rapid growth of private markets.

The report from service providers Accelex and FactSet said the rapid growth of private markets is intensifying data challenges for fund administrators.

“Private markets' rapid growth has fundamentally

reshaped the demands of the buy-side."

The report, “Unlocking Operational Excellence in Fund Administration through AI”, is based on interviews with senior executives across 16 leading fund administration firms, which collectively manage over $13 trillion in assets under administration and employ more than 53,000 professionals worldwide.

The results showed that 55% of fund administrators consider data acquisition and data governance as their primary operational challenge. “Private markets' rapid growth has fundamentally reshaped the demands of the buy-side,” said David Mellars, Senior Vice President and Senior Director of Buy-Side Middle Office Product Management at FactSet.

They expressed “significant concerns” about data availability, accuracy, and timeliness. “The biggest trend compounding this challenge is the growth of private markets, driven by the inclusion of retail investors and the growth of private credit,” it said. “These trends have increased data volume, complexity, and reporting demands.”

This is not the first time the private markets boom has been noted to come with a large administration burden. “The private markets industry is having its day in the sun,” said Lounarda David, Chief Operating Officer, of IFM Investors to Fund Operator last year. “Investors across the board are recognising the benefits of these asset classes and are facing the challenges of attempting to administer them. I would expect more players offering products in this area, and more investors seeking long-term stable returns.”

Others said much of the reason was that “the challenges boil down to the complexity of the assets”, as well as the number of manual activities in private markets, the need for specialisation, and then being able to build a robust and scalable operating model.

“The requirements for private markets are very different to those for public markets and many firms that have historically invested in public markets are now building up significant books of private markets assets,” said Dan Sharp, Partner at management consulting firm Sionic, in an interview with Fund Operator. “There are several different challenges in applying that same Target Operating Model, which is established for public markets, to private markets.”

Other issues mentioned in the report included:

• 25% are focusing on process automation, while only 11% are focusing on improving data quality.
• Nearly one-fifth (17%) are struggling with HR challenges due to a lack of specialised skills, lack of incentives and fatigue due to manual processes.
• Clients are prioritising quality service, operational excellence and regulatory compliance when it comes to fund administrators.

What are the recommendations?

The report firmly puts some of the main solutions in the realm of technology.

Mellars said that better tools will help all market participants overcome data quality challenges, reduce inefficiencies, and meet rising client expectations with precision and confidence.

“To solve the issue, 25% of fund administrators are focusing on process automation,” it said. “However, these efforts are falling short due to poor underlying data quality issues and expedited flawed processes.”

Only a small fraction (11%) of this was focused on improving data quality and governance, despite their direct impact on reporting accuracy and timeliness, it added.

It was, inevitably, artificial intelligence (AI) that was seen as the golden ticket to solve many of the issues.

"AI-driven data governance empowers administrators to build trust,

foster transparency, and position themselves as leaders.”

“Looking ahead, fund administrators are increasingly embracing AI, with some respondents reporting that AI technology has reduced data processing times by up to 80% while achieving near-perfect accuracy,” said the report. 

“By streamlining workflows, enhancing accountability and meeting complex regulatory requirements, AI-driven data governance empowers administrators to build trust, foster transparency, and position themselves as leaders,” said Michael Aldridge, President, and Chief Risk Officer of Accelex.

David said in her discussion with Fund Operator to “Never underestimate the importance of process optimisation” in order to succeed with private markets. “Always look for ways to streamline and improve workflows, and investing in technology and training can significantly enhance productivity and accuracy,” she said. “Put time and effort into building a robust data governance framework and oversight model to increase efficiency, analytical insight and technology optimisation.”

Whether the rush to AI will be as effective as hoped remains to be seen.

 

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