Private markets have always dragged their feet on tech. However, we’re entering an era that may backtrack on previously hesitant action to adopt technology across the entire industry.
A Delio report says 74% of financial companies think tech isn’t central to private market services, which would be hard to believe in any other industry. But firms that do adopt smart tech tools enjoy tangible wins. McKinsey points out new systems for limited partner management, analytics, and deal screening can cut costs 4-7% and boost productivity 10-15% per employee on assets under management. Bigger funds stand to gain the most.
So why the slow adoption? Risk aversion plays a big part.
The last decade brought discount platforms which promise to speed up fund operation templates to slash costs with automation. They turned six-figure legal bills into cheap, copy and paste documentation through basic technology. The problem with that is, private markets have no room for error. One missed box or wrong decimal can jeopardize deals. Many partners are now dealing with the mess from ditching experts for these quick fixes.
Big players saw the risks and avoided them at all costs. That’s why tech adoption crawls at a snail’s pace in an industry where digital revolutions flourish elsewhere. Private markets remain wide open for change, but the next tools need a smarter angle.
As cash keeps pouring in, 2021 saw private fundraising hit $1.2 trillion, with assets under management jumping 32% to $9.8 trillion. More money means more limited partners, funds, and service providers. Scale usually brings leverage, but that’s not true here, as manual processes make administrative costs rise. McKinsey notes operational complexity wipes out scale benefits for large general partners. Therefore, new tech has to cut complexity without adding risk. How?
1. Utilize Tools at Your Disposal
Early platforms tried to replace lawyers, admins, accountants, and tax professionals. That was their flaw. The solution? Empower your experts instead of cutting them out. Utilize platforms that boost efficiency, accuracy, and data and let pros handle the tough stuff to grow funds.
2. One Central Hub for Data
Having a single spot for structured info and docs frees back-office teams and providers from hunting and cleaning data, allowing them to focus on fund lifecycle tasks that matter.
3. Link Providers Straight In
Connect third parties to the fund’s core system. They get instant access, clear audit trails, and tracked communications with everyone involved so their workflow operates seamlessly.
4. Automate Tricky Steps
Automated workflows ditch manual labor for faster, accurate, trackable processes, like onboarding investors, collecting AML/KYC, or sending capital calls.
Private markets are just starting to digitize so managers don’t have to choose between speed over security anymore. Emerging tech solutions let all stakeholders automate and scale operations without extra risk.