The Alternative Investment Space is Realizing the Efficiencies of Going Digital

By Georgette Kiser, CIO, The Carlyle Group

Georgette Kiser, CIO, The Carlyle Group

Across the past 20 years, the Capital Markets have harnessed digital transformations to drive efficiencies in traditional investment management such as retail banking, trading, and sales. Finally, the alternative asset industry is catching up, realizing the efficiencies it can gain by going digital.

"Explosion of fintech partnerships, data, analytics, cloud computing, and other digital technologies has dramatically enhanced private equity firms’ ability to streamline core business processes"

Digital transformation is the redesign of core processes and interactions for improved efficiency and value by combining a deep understanding of user needs with agile design practices and digital technologies (Cloud Computing, data/analytics, fintech partnerships, intelligent automations, Telepresence and mobile, etc.).

For those unfamiliar with alternative investments, they comprise assets other than traditional stocks, bonds or cash— such as investments in financial assets and pooled funds including venture capital, private equity, hedge funds, REIT and commodities. Specifically, private equity includes numerous investment strategies, including private debt, private credit, and corporate buyout. These strategies are supported by core business function such as fundraising, investment management, and monitoring, investment planning and capital redistribution. Numerous operational processes underlie these functions— from reporting and analytics to identify deal opportunities, to accounting and legal to support deal completion—all of which can be further enhanced through digital transformation.

For example, digital distribution of alternative investments is a trend that has opened investment opportunities to new audiences. Fueled by extensive user experience research, finite platforms such as I capital Network that has made it easier for advisors and high network investors to gain knowledge about private equity investments—transforming knowledge delivery in the private capital space.

Traditional investment management firms have long relied on data to drive decision-making and improve process efficiency. While the private equity space has always been data rich, it is just now beginning to organize its data to build data-centric, self-service environments in which time is spent on analysis and reporting, rather than on data manipulation. There consulting analytics can provide competitive insights that strengthen deal decision making, empowering vest or sand investment management teams, and streamline middle and back-office operations such as tax, compliance and investor servicing.

Cloud computing is another digital service that is transforming the alternatives space. By leveraging economies of scale, cloud computing provides real-time application access from anywhere in the world, while offering a-pay-per-usage model that reduces upfront capital and supports scalability. The limited hardware requirements also make it easier to implement new applications and sustain ongoing enhancements to meet evolving user needs. In private equity, the popularity of cloud computing has prompted many investment firms to ree-valuate their technical strategies and resource plans, with a shift towards SaaS-based products (e.g., software are as a service/cloud hosted application providers). For example, the following SaaS providers have products targeted to private equity: SunGard (accounting), Affront (investor reporting) and Salesforce (fundraising and other functions needing a customer relationship management process).

The explosion of fintech partnerships, data, analytics, cloud computing, and other digital technologies has dramatically enhanced private equity firms’ ability to streamline core business processes including fundraising, investment management and monitoring, divestment planning and capital redistribution. To continue to remain competitive, private equity firms will need to effectively harness and measure the impact of digital technologies to drive efficiency and add value. To do this, private equity must apply the same methodical, fact-based approach they bring to all investments to fuel digital transformation.

Read Also

The Data Driven World

The Data Driven World

Alex Pettit, CIO, State of Oregon
Three Key Themes to Shape the Remainder of the Year

Three Key Themes to Shape the Remainder of the Year

Mona Mahajan, US Investment Strategist, Allianz Global Investors
Fintech and Enhancing Transparency- The Evolution of ALFA

Fintech and Enhancing Transparency- The Evolution of ALFA

James Wallin, SVP, Fixed Income, AllianceBernstein
Top 10 Alternative Data Solution Providers - 2018

Alternative Data Special