LONDON, Feb. 16, 2021 /PRNewswire/ — Private capital funds in the United States face growing demands for transparency as mainstream investors increasingly turn to the sector to chase the higher returns it offers, new research* from Intertrust N.V. (“Intertrust Group” or “Company”) [Euronext: INTER] reveals. Intertrust Group, a world leader in providing specialized administration services to clients in over 30 jurisdictions, estimates that around US$3 billion will need to be spent in the US alone to meet these increasing demands over the next five years. The estimated cost for the private capital funds industry globally is US$5.5 billion.
A new report, entitled The future private capital CFO: Evolving in a digital age and created in partnership with Global Custodian, shows that CFOs at private capital funds in the US expect their limited partners (LPs) to require data updates with increasing frequency over the next decade. Seven out of 10 (70%) respondents expect their investors to be looking for access to live or daily updates on both portfolio performance and cybersecurity. More than half (56%) of CFOs expect a need for daily or live updates on operational service level agreements (SLAs) and 64% on environmental, social and corporate governance (ESG).
US CFOs anticipate higher priority will be placed on cybersecurity and ESG than their peers elsewhere: only 57% and 51% of CFOs globally anticipate live or daily updates for these functions respectively.
Although extensive investment will be required to meet these greater demands, they are also conflicting with private capital funds’ traditional leaning towards confidentiality. Intertrust Group warns that private capital funds must either meet these greater demands or face significant competitive disadvantages and possibly regulatory pressures.
David Sarfas, Head of Private Capital, Intertrust Group, said: “The recent developments of allowing 401(k) money access to private equity investments will drive the need for more frequent and relevant information be provided by alternative asset managers.
“Cybersecurity will always be crucial to CFOs as the level of attacks will continue to increase, while ESG is an increasing part of how investors continue to assess and monitor risk in a continuously evolving regulatory environment.”
The research also found that 22% of US CFOs expect that meeting the demands for portfolio performance updates will incur the greatest draw on their resources. Other factors expected to draw on resources include operations (18%); regulation (17%); cybersecurity (16%); investor demands (13%); diversity and inclusion (D&I) (8%); and ESG (6%).
Around one in four CFOs (24%) say they will respond to the anticipated increased demands by investing in technology, while 24% say they will increase the size of the in-house finance team, 21% will outsource more functionality, 21% will invest in distributed ledger functionality and 10% will retain the existing balance between in-house and outsourcing.
David added: “Insourcing has generally been more common in the US. But we expect private capital funds will increasingly outsource as ever more data pressures around reporting to investors and regulators will make industrial solutions around the manipulation of the data more attractive.”
*Source: Global Custodian in partnership with Intertrust Group; a global sample of 300+ chief financial officers at private capital funds were surveyed between 20 November 2020 and 26 January 2021, including 88 in the US
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About Intertrust Group
At Intertrust Group our 4,000 employees are dedicated to providing world-leading, specialised administration services to clients in over 30 jurisdictions. This is amplified by the support we offer across our approved partner network which covers a further 100+ jurisdictions. Our focus on bespoke corporate, fund, capital market and private wealth services enables our clients to invest, grow and thrive anywhere in the world. Sitting at the heart of international business, our local, expert knowledge and innovative, proprietary technology combine to deliver a compelling proposition – all of which keeps our clients one step ahead.
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SOURCE Intertrust Group