How should the use of technology evolve in a business – should it be driven by client requests versus internal objectives?

That was the question in a recent Clear Path Analysis webinar where several industry experts gave their views on the rapid increase in interest in private assets and what various operational strategies one needed to take into consideration to achieve goals.

Much of the conversation centred around the operational burden increasing with the heavy use of data that comes with private markets. Can companies cope with this and what are the smart ways to alleviate it?

The discussion now forms the basis of a new report, “Addressing operational challenges around launching a private credit strategy”, sponsored by Arcesium.

In it, the figures – from Oaktree Capital Management, Bayview Asset Management, Russell Investments, Macquarie Asset Management and Arcesium – share their views and practical advice on how to integrate technology on this tricky idea.

Should it be a natural process as old technology becomes obsolete, or should it be done in or go when the needs are there?

Read below, to explore the issue and their thoughts.

Fund Operator: How do you intend to evolve the use of technology platforms over time and how much is this driven by client requests versus internal objectives?

Andy Murray, Managing Director, Product Management, Oaktree Capital Management: The big part is the number of structures that we are seeing around credit vehicles. [There are lots of] different types, but this comes with a cost and the point is that there are a lot of people moving into credit and that means increasing competition and no big surprise this is driving fee compression as well.

Technology has to be a solution as we are being asked to do more with the same or less. As a business this is one of our drivers, how we can move on in this front. We are looking at workflow tools and we operate our version of Geneva to support credit, and this is becoming the route that we want to go down so that we can industrialise a lot of what we do on the operational side.

"The key word is evolution; we can’t be static in our

current technology solution, and we know that."

Keith Brakebill, Senior Portfolio Manager, Investment Division, Russell Investments: We are going to have to continue to integrate more and more technology solutions as we come to more complex underlying fund structures, whether it is the regulated interval funds and types of structures here in the US, and you are doing it in multiple places with multiple types of terms rather than building an entirely custom process for each one of these fund types in the evergreen style funds. Having underlying forecasting engines that can help and making them customisable to the terms but with the same underlying architecture is what is going to help scale this process across multiple different fund types.

Ester McEwan, CFO of Funds, Bayview Asset Management: The key word is evolution; we can’t be static in our current technology solution, and we know that. Constantly being able to be in touch with the market is my job and my job is in understanding and networking what are the new solutions, what we need to be looking at to ensure that we are always moving forward, best in class and then figuring out how to enhance our technology footprint. The journey never ends.

"Enticing the user base to adopt new technology remains a big hurdle as human nature

makes us want to continue doing things the way that we have been."

Gavin Lau, Managing Director, Head of Private Credit Fund Management, Macquarie Asset Management: It is a digital-first mindset, to be agile and go through iterative changes rather than big-bang changes and this means that you can be adaptable. It is important to build and establish universal business confidence from the finance and operational teams where you do proofs-of-concept and pilots and then commit to rollouts.

If you can demonstrate that it is working bit by bit, you are going to bring the rest of the firm on that journey, and it is that momentum and digital-first mindset that will carry you through whatever is in front of you.

Cesar Estrada, Private Markets Segment Head, Arcesium: Enticing the user base to adopt new technology remains a big hurdle as human nature makes us want to continue doing things the way that we have been, so you have to give value and make it simple for the user base for them to want to adopt new technology.

You can read more of the group’s thoughts, and the report in full, here.

 

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