Senior Director of Fund Sales, US
The pandemic-inspired ‘Great Resignation’ and remote work trends are making private equity back-office talent harder to find and more costly to recruit and retain
Outsourcing – a growing trend among private equity firms for several years – has reached a tipping point. We predict that the vast majority of private equity funds will be outsourcing fund administration by the middle of the decade.
Even so there’s still a long way to go, though the pieces to make it happen are already in place. In a world shaped by the pandemic experience, the enhanced operational efficiency promised by outsourcing will be difficult to ignore.
Our back-office outsourcing prediction is built on several factors, one of which is the current labour market.
The Great Resignation
In the US, there are 3 million more jobs than there are people looking for work; more surprisingly, in the first ten months of 2021 American workers handed in nearly 39 million resignations, according to the Wall Street Journal. The phrase ‘Great Resignation’ has been coined to describe a talent shortage driven by a Covid-related desire for change.
It won’t last forever and reality will bite sooner or later, but right now the most significant consequences are being felt in sectors such as retail and hospitality.
But fund management is not immune. Skilled back-office accountancy, tax and operations staff are increasingly difficult to come by, and they cost more to hire.
We regularly hear about fund accountants receiving multiple offers with generous hiring bonuses – highly unusual before the pandemic.
This talent race may stabilise, but is unlikely to disappear. By one calculation, from Preqin, there were 3,968 private equity funds in the market in 2020, a five-year high. The competition for good back-office staff has never been more intense.
The remote workplace is here to stay
Add in remote work and you have a perfect storm for the sector. A remote workplace makes hiring more difficult. It also makes it trickier to retain the talent you already have.
Most companies’ onboarding, training and mentoring programmes have been designed with physical presence in the office in mind. Company culture is more difficult to instil when employees work from home two, three or more days a week.
Anecdotally, we are hearing that managers are having to spend more time on one-to-ones with remote staff than they did when everyone was in the office, presumably because the wider support networks we all relied on before the pandemic are less easy to access over a Zoom call.
Is the remote workplace a temporary measure? It seems unlikely. Most consultants agree that homeworking will become permanent to some degree, with an average of two days a week away from the office.
Operational efficiency: doing more with less
On top of it all, this is not a great time for the sector to be struggling with recruitment and retention challenges.
Limited Partners (LPs) and regulators are demanding even greater transparency, a position reinforced by the performance reporting stipulations of 2020 GIPS, ILPA 3.0 and others.
The complexity of modern funds, combined with these increased demands, are driving investment in new technology and employees with the skills to store, process and analyse the data it produces, effectively and securely.
Arguably, nothing reflects this better than the rising ESG trend; private equity funds must now gather and process a wide range of ESG data in order to conform to a bewildering array of global standards.
ESG requirements are only going to become more stringent. They are a prime example of private equity being forced to do more with less.
Back-office outsourcing can help
Outsourcing fund administration is one helpful solution. Fund managers can offload the time spent on recruitment challenges as well as make savings on frequent technology upgrades.
Finding a high-quality partner is key. Private equity managers must be assured of security and sensitivity around their in-house data. The steep rise in remote working during the pandemic undoubtedly brought about greater security risks; but at the same time, this trend also started to boost confidence in outsourcing services. If an in-house fund accountant now works from home for half of the week, back-office functions are already, in effect, partially outsourced. Increasing numbers of managers are coming to the conclusion that working with a partner will allow them to focus on what they do best: the investments.
The advantages of outsourcing fund administration
We think the current hyper-competitive labour market, alongside a permanent shift to hybrid working, makes a compelling case for the outsourcing of fund administration.
And while the labour market might stabilise in time, the continual need to keep up with new investor and regulator demands (and the technology to meet them) will remain.
What about keeping control? A good outsourcing partner, such as Intertrust Group, will act as an extension of your own team. Expectations around everything from callback and email reply times to reporting timelines will be set. You should know the names (and have the contact details) of every member of the team that works on your behalf.
Added up, it makes sense. That is why we predict that 80-90 per cent of private equity funds will be outsourcing back-office functions by the middle of the decade. When it comes to the back office, loosening your grip can benefit your business.
Why Intertrust Group?
Outsourcing fund administration to Intertrust Group includes the HR, technology and data security requirements that go with it. In addition we offer:
- access to the latest fund administration solutions without you needing to invest in them
- sophisticated ESG tools so we can gather the right data on your behalf and model it for a range of global reporting standards
- a more efficient, transparent and compliant back office that’s easy to scale, so growth is facilitated
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