SS&C Survey: More Private Equity Firms Focusing on Operations, Governance, Transparency

May 4 2017 | 10:11pm ET

Significantly more private equity companies are focused on operations compared to three years ago, according to a new survey from fund administration and services firm SS&C, driven largely by increased regulatory requirements and LP demands.

The survey, which polled 100 GPs, LPs and other professionals within private equity space, shows an increased focus on private equity operational efficiency, governance and transparency. 

Other findings from SS&C’s survey:

  • 88% of respondents reported being more operationally focused today compared to three years ago, with demands from limited partners cited by 33% and enhanced reporting requirements by 22%.
  • Almost half of respondents (47%) ranked regulatory changes as the top factor expected to most impact private equity within the next year. Yet, only 17% cited changing regulations as the driver behind their increased focus on operations
  • 40% of respondents predict that credit will be the top investment strategy spurring PE growth, while 35% believe buyout/VC will contribute to this growth.

The survey also revealed the factors for why limited partners would select a general partner:

  • Governance and controls (62%)
  • Increased demands for transparency (53%)
  • Strong management team (85%)

Investors are seeking separation of duties and built-in transparency to the accounting and reporting process, SS&C reported. This helps to protect investors’ interests within the framework of the limited partnership agreement and allows private equity firms to focus on their core competencies – the effective management of investments and safeguarding of capital.

Meanwhile, transparency will continue to be a focus for general partners due to increasing regulatory pressures, the company added. Nearly half of respondents (47%) ranked regulatory changes as the top factor expected to most impact private equity within the next year. While acknowledging the burden of mandatory reporting requirements, only 17% of respondents cited changing regulations as the driver behind their increased focus on operations.

Going forward, 40% of respondents predict that credit and 35% of respondents predict that buyout/VC will be the top investment strategies spurring private equity growth in the year ahead, SS&C’s research revealed. With an influx of capital lifting the overall assets under management, firms will require significant investment in people and technology to stay competitive. However, just 18% of respondents anticipate human capital management will have a major impact on the future of private equity in the year ahead. 

While private equity continues to evolve towards using third party fund administration, SS&C is seeing a significant uptick in adoption – especially as investors and regulators look for additional independence of fund accounting and reporting activities. 

“These survey results confirm what we are seeing in the marketplace,” said Joe Patellaro, managing director of SS&C GlobeOp private equity services, in the statement. “A growing number of private equity organizations look to third parties such as SS&C to procure fund administration, operational, performance, investor reporting, regulatory, and other services.” 

Founded in 1986, SS&C provides investment and financial software-enabled services and software focused exclusively on the global financial services industry, providing services to more than 11,000 financial services organizations managing an aggregate $44 trillion in assets.

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