This post is part of a series on The Digital Transformation of Private Equity: Unlocking Opportunities in Private Markets. If you’d like to download the full report, click here.


Where the market currently stands

Private markets have shown remarkable resilience, growing at an annual rate of 20 percent between 2018 and 20233. Although the market has cooled since its noted spike in 2021, the future looks promising, with sustainable investing becoming a particularly prominent trend and accounting for $200 billion worth of deals in 20244.

Taking a broader look at the asset management industry, it has experienced stunted growth throughout 2023. By June, Europe-focused funds endured their highest outflows, with 14 consecutive weeks of declining volumes5. However, there’s significant optimism in the air, as 84 percent of asset managers expect the industry to grow6, with this sentiment backed by economists; PwC predicts AUM to grow to $147.3 trillion by 20277 and by then, private markets are expected to make up 50 per cent of total revenue for asset managers, which is a significant increase from pre-COVID years where it has traditionally been less than 40 percent8.

With such vast volumes and substantial changes incoming, many asset managers are asking themselves how they can capture a greater market share. Yet, despite 84 percent expecting the market to grow, only 22 percent are planning to implement changes to their operating models to achieve greater efficiency9. Of these 22 percent, only 63 per cent plan to do so by deploying new technology, which is a surprising finding.

Instead, asset managers seem to be occupied with solving other challenges. The top three concerns are performance (affecting 59 percent of managers), talent management (exactly half) and rising costs (44 per cent)10. Just 31 percent were concerned with outdated technology11, but bypassing this issue is a false economy, as many of the top concerns can be solved with better digitisation.

25% of private equity firms are not at all digitised, with a staggering 0% being fully digitised.

Where digital transformation can make an impact

In the context of private markets, there are many aspects of the workflow which are ripe for digital transformation. While a technology revolution is certainly underway in the PE industry, 14% of private equity firms are yet to embark on any form of digital transformation and are still relying on manual processes for fundraising, deal sourcing, portfolio management and customer relationship management12. As you’d expect, these laborious processes drive up costs and execution time in comparison to digitised public markets.

There are many areas within private markets that we believe are ripe for digital transformation. Among these, the most important include:

  • Executing manual repetitive processes: Digital transformation presents a transformative opportunity for PE firms and asset managers by revolutionising the execution of manual, repetitive processes. By leveraging automation, firms can streamline tasks such as data entry, document management, and regulatory compliance. This not only reduces operational costs but also enhances efficiency and accuracy, allowing professionals to allocate more time and resources towards strategic decision-making and value creation. Embracing digital transformation not only optimises workflows but also enhances competitiveness and agility in an increasingly dynamic landscape.
  • Reporting: current annual reporting requirements for PE firms consist of a patchwork of disconnected and manual systems including Excel spreadsheets, and incompatible formats. With no present universal system of record for ownership, a digital tool that automates the process for PE firms is a simple way to lessen the burden, while reducing manual intervention.
  • Trading and settlement: public markets trade on centralised exchanges digitally. As such, all market participants are connected, and transacting is nearly instant and seamless. However, as mentioned earlier, transactions in private markets still rely heavily on manual processes substantially increasing these timelines. There are digital solutions that can close this gap.
  • Distribution efficiencies: By deploying digital platforms and advanced analytics, firms can optimise their distribution
    channels, streamline processes, and tailor marketing efforts to target specific investor segments more effectively. Automation of tasks such as investor onboarding, reporting, and communication not only accelerates the distribution process but also ensures a personalised and seamless experience for investors. With digital tools enabling real-time tracking of investor preferences and behaviours, firms can adapt their strategies promptly and capitalise on market trends. Digital transformation in distribution operations not only enhances operational efficiencies but also strengthens client relationships and drives growth in private markets.

There are even more opportunities, as we will explore throughout the full report. We believe that digital transformation in these key areas is essential for any manager in the PE industry to remain competitive.

As analyst, Shanu Sherwani, recently commented in his article for AGEFI, “Private equity houses must embrace digitalisation as oon as possible to reduce holding periods and increase returns while minimising risk”13. Being equipped with the right back-office management, data analytics and accessibility tools means managers can improve client experiences, make efficiency gains and minimise risk, as well as reduce holding periods14. Firms that do this can better navigate the modern era of PE, while those that don’t could get left behind.

“Whether asset managers opt to insource, co-source or outsource, there is ultimately a move towards bringing all data needs under one roof. More and more we are finding demand for a tool or platform which gathers, saves and keeps all relevant data safe. Doing this considerably simplifies the role of the asset manager. 15” – José Longrée

3 Source: McKinsey
4 Source: McKinsey
5 Source: Best Execution
6 Source: Northern Trust
7 Source: PwC
8 Source: PwC
9 Source: Northern Trust
10Source: Northern Trust
11Source: Northern Trust
12Source: S&P
13Source: Antwort
14Source: Antwort
15Source: EY