A pair of 2021 surveys show fund managers anticipate technology playing an increasingly important role in how funds operate.
The COVID-19 pandemic has had an effect on all industries, and Private Equity is no different. The transition to a remote workforce has affected everything from document security to client relations.
The question then becomes: as the pandemic wanes, will things go “back to normal,” or will these changes signal the start of a new era? A pair of 2021 surveys from EY shed light on how managers see the future and how the right fund administrator might be able to help funds better transition to this new reality.
The first, entitled, “Are you exploring the future or just visiting?” surveyed PE firms from around the globe. One of the things participants were asked was how COVID-19 has affected their operations:
As you can see, the top three answers (and four of the top six) all had to do with no longer having a centralized in-person workforce. Not only were employees now communicating remotely, but annual meetings, fundraising, and due diligence all had to be virtual. Firms that had lagged behind in implementing technology that allowed for these tasks to be performed remotely had to quickly adjust. As EY put it, “COVID-19 accelerated the digital transformation of private equity firms by forcing them to operate in a remote environment.”
While some may have looked for temporary solutions and an eventual “return to normal,” others saw this as a chance to update their processes and get ahead of advancements in technology, believing their investors would come to expect the ability to access information online when they want it. According to EY, “Forward-looking firms recognized this as an opportunity to improve and redefine their operating model”
Take a look at the results of this question on how many managers anticipate permanent changes to how they do business:
The overwhelming majority, regardless of fund size, say they’ve learned things during COVID that will change their operating models in some way over the next three years. That’s likely because firms that were hesitant to implement technology-based processes have seen how easily it can be done, and have no intention of going back. EY summed it up thusly: “Now, as they look to 2021 and the future, CFOs say they are planning to double down on their past bets in technology.”
While some managers may view remote work as a hindrance and hope to go back to things as they were, others view it as an opportunity, and in order to take full advantage of the benefits remote work can provide, they need to improve their technology. At the same time, managers don’t expect all functions to be handled remotely:
The two functions managers believe will be performed remotely most often are “Compliance and regulatory reporting” and “fund accounting,” tasks often performed by third-party fund administrators. With a remote workforce, performing these functions in-house is no longer materially different than assigning them to an outside party, as both will require strong data security measures. Outsourcing those tasks to experienced professionals employing industry-leading security tools makes remote work more secure, allowing fund managers to provide remote opportunities to employees who desire them, even after the pandemic ends.
From this first survey, we can see that the pandemic has taught many fund managers the value of technology and the benefits of outsourcing certain remote functions. But what about investors? Now that they’ve experienced the remote communication brought by the pandemic, do they want to go back the way things were?
Another survey by EY, “Can the difference of one year move you years ahead?” asked alternative fund managers and investors how they saw the industry changing in the future, and this question asked of investors was very telling:
While these investors performed a majority due diligence activities in-person prior to the pandemic, they now believe the majority of those activities will be done virtually. Investors have seen how convenient remote communication can be, and they’re going to expect it. The key is to ensure you can provide the security and transparency those investors expect.
Funds employing technology solutions for data security, regulatory compliance, due diligence, onboarding, investor relations, and other areas will have an easier time attracting the investors of the future. That’s why JTC has built its Private Equity fund administration solution on industry-leading technology. Our award-winning eSTAC platform allows for 24/7 access to important documents and best-in-class solutions for security, transparency, and compliance. With the right technology, you can offer more to your investors, and when big changes in the industry happen, you’ll be prepared for them.
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