Almost half of private capital firms (48 per cent) believe their ad hoc and exploratory approach to adopting advanced technologies has left them facing a growing list of challenges, according to a study by Intertrust Group (Intertrust).
The study entitled ‘Introducing the Halo Framework’ found that cybersecurity breaches, poor quality data and higher operating costs were the main challenges private capital firms found when adopting advanced technologies such as blockchain and AI.
Despite the awareness of these challenges, the study reveals that just 6 per cent of respondents say they have built a ‘mature’ tech platform incorporating next-generation technology across the firm.
The study also finds one of the biggest obstacles facing private capital firms is finding the right staff to help improve their data analytics, and onboard next generation technology. 64 per cent of respondents admit that they struggle to recruit and retain suitably qualified staff.
Data management problems are also cited in the study by 53 per cent of respondents. Intertrust highlights that private capital firms’ inability to consolidate data across multiple disparate sources and asset classes often produces inefficient analytics.
Almost half (49 per cent) say that a lack of automation, resulting from a continued reliance on spreadsheet-based manual systems, is increasing operational costs and reducing efficiency, while 4 per cent have concerns over cybersecurity and data privacy related breaches.
58 per cent of respondents say that their firms are likely to significantly increase outsourcing within their fund operations in the short- to medium-term.
According to the findings, the three biggest drivers to outsource are cost savings and efficiency gains, access to people with specialised skills and better handling of complex regulations.
Intertrust Group’s survey respondents consisted of 150 senior decision-makers across private capital firms, hedge funds and private wealth managers.
Chitra Baskar, president of fund solutions at Intertrust Group, says: “By their own admission, most private capital general partners have been slow to fully embrace and invest in new technologies to improve their operating models. The increasing risk of cyber threats is now adding to these tech challenges and associated costs.
“As private capital firms progressively look to upgrade, update or modernise their operating model, they are increasingly looking for trusted third-party vendors and partners that can provide established platforms and solutions to support their technology needs.
She concludes: “Moving to the cloud, or licencing SaaS platforms, are just some options available to the funds, besides using an outsourced service provider who can bring all of them together as a package. Best-in-class technology and practices will improve operational efficiency and meet the data needs of private capital firms.”
