Australian private capital funds turn to outsourcing as pressures grow

Outsourcing might not be a natural choice for private capital in Australia but stretched fund managers are looking to drive new back-office efficiencies. Nicole Hu, Director, Private Capital, Australia and Jeremy Brugmans, Commercial Director, Australia, tell us more.

Australian private fund managers are in the habit of doing everything in-house.

There’s no regulatory pressure for third-party support and local investors, conscious of cost, don’t push for independent oversight of funds.

But that is starting to change. New pressures are persuading fund managers to look again at outsourcing.

A few pioneers are searching for a complete outsourced fund administration service. Others want a hybrid solution to supplement in-house teams and drive back-office efficiencies.

Rising pressure

What is driving this shift? Partly, it’s a personnel problem.

The Covid pandemic drained the Australian talent pool. Closed borders meant foreign professionals were locked out of the country for long periods.

Driven by the pandemic, the “Great Resignation” caused many to rethink their work-life balance, values and ambitions, resulting in a large number of Australians and expats to leave their jobs.

Even large funds are struggling to find the experienced accountants and administrators they need. Smaller funds are simply having to do more with less.

Increased demands

At the same time, fund managers are dealing with an upswing in the demand for data and reporting.

Australian real-estate and private equity markets are major attractions for foreign institutional investors. These sophisticated limited partners are asking for bespoke reporting that sometimes goes well beyond traditional investor statements.

Against this, some fund managers are finding that their traditional reporting templates and processes don’t go far enough.

Then there’s ESG to contend with, with new requirements around sourcing, validating and reporting sustainability data.

Outsourcing as part of a hybrid solution for private equity

Given the circumstances, it’s no surprise to see managers reaching out to fund administration third parties such as Intertrust Group.

Some of them are talking to us about a “plug-in” solution. That effectively means we loan them accountants to help clear backlogs.

But this is a temporary solution for challenges that are here to stay. It’s a sticking plaster at best.

Established funds are struggling to scale up with the back-office teams they have. Newer funds are struggling to build back-office teams at all.

Yet for Australian private equity and real estate, which both flourished through the pandemic, new launches are coming thick and fast.

Back-office teams are wilting under the strain. In some cases, the rigid application of in-house models is becoming a drag on growth rather than a driver of it.

Technology driving fund efficiency

Scalability is one reason Australian private capital fund managers are taking a closer look at outsourcing. Another is technology.

Newer funds without a well-established technology platform are looking to outsourcers to provide one. That saves them the time and expense of sourcing, buying and maintaining their own.

Larger funds may already have the technology they need and naturally want to squeeze it for every drop of ROI.

But increasingly, investors demand instant access to data and more LPs are looking to funds to provide it. Many traditional technology solutions don’t include an investor portal as standard.

The attractions of outsourcing become clearer when top-tier technology is included as part of a rounded fund administration service.

The benefits of strategic outsourcing in private funds

With a good third-party provider on board, that rounded service gives fund managers the ability to scale up quickly. It clears backlogs in the back office.

And for those funds fighting for talent, outsourcing eliminates costs associated with recruiting, training and equipping good fund accountants, administrators and IT staff.

That’s an attractive proposition in the current climate. Outsourcing has not traditionally been the first choice for many Australian private capital fund managers, but new pressures and opportunities are forcing a rethink.

Why Intertrust Group?

• As a strategic partner, we offer a full-spectrum service tailored to meet all back-office needs throughout the lifecycle of a private capital fund. This is against a background of ever-increasing reporting demands.
• Our proprietary innovative technologies are combined with global knowledge and experience to deliver added-value services catering for all asset classes, while increasing manager visibility of portfolios on behalf of a fund’s investors.
• Our expert teams harness tools and cutting-edge technologies to eliminate costly errors in the handling of fund administration and corporate actions, investor relations and portfolio management.
• Intertrust Group is a publicly listed company with 70 years’ experience in providing world-class trust and corporate services to clients around the world.