Alternative Investment

High Expectations For Digital Growth In Private Capital Industry

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We talk to Bite Investments about what”s driving wealth managers to spend money and time on their technology.


This news service interviews William Rudebeck, CEO of
Bite
Investments
.


What are the reasons for fund managers investing heavily
in tech to improve their digital capabilities? 


Rudebeck: There are several underlying reasons for private
capital’s investment in enhancing its digital capabilities. If
everyone else is updating their legacy infrastructure, it is
important for firms not to be left behind, but more importantly,
it enhances operational efficiency.


Additionally, security has become increasingly important, and
legacy infrastructure can have the potential for security risks.
According to Bite’s latest white paper, entitled
The Tech’s Factor: the digitalization of private markets in
2022 and beyond
,
data from US senior executives from
middle market, boutique funds, and asset managers showed that 90
per cent of firms with assets under management of more than $1
billion say that keeping ahead of the game regarding
technological capabilities at their organisation is a top
priority. 


What will a digital future look like for the private
markets industry? 


External digital investments (e.g., for advisors and service
providers) are expected to increase. Over three quarters (80 per
cent) of larger firms expect to make external digital investments
north of $1 million, with 33 per cent anticipating investments of
between $5 million and $10 million. In terms of the services used
by these external digital third-party providers, it’s often the
size of the company that dictates what is needed and prioritised.
For instance, 81 per cent of larger firms use a specialist
third-party software service provider for their due diligence.
However, smaller firms are more likely than larger ones to say
that they currently use third parties for their portfolio/fund
management, analysis, and investor profiles. 


What digital operational efficiency will have the largest
impact on how private equity firms will operate over the next ten
years? 


Cloud/Software-as-a-Service (SaaS) will have the most significant
impact. For this reason, increased investment in cloud/SaaS
solutions is deemed necessary to improve operations. Most firms
expect to invest further into areas in which they have already
made progress and investments. Besides cloud/SaaS solutions (78
to 80 per cent), these also include social media, and mobile and
collaborative digital technologies (75 to 83 per cent). The
primary benefit of using cloud/SaaS platforms is to streamline
operations. 


How has Covid-19 affected the private capital
industry? 


The pandemic has been a catalyst for change. It has encouraged
large firms to enhance their technological capacity and smaller
firms to capitalise on a first-mover advantage. 


Those businesses which had already laid their digital foundations
or had technology at the centre of their business model are
better positioned. This has also been true for the private
capital industry. Whether meeting investors or building
relationships to attract new business, activity primarily had to
be conducted remotely over the past few years. Many smaller fund
managers have struggled in these conditions because they may not
have a track record or the relationships, but technology is
helping to bridge that gap. 


What are the underlying drivers for digitalising private
markets? 


Whatever improvements and upgrades are being made; they all rely
on data. As digitalisation accelerates, fund managers will have
to adapt to the continuous tech evolution. Our mission at Bite
Investments opens possibilities in alternative investment markets
with digitalisation and a new forward-thinking approach, enabling
firms to configure their own digital platform to improve the
experience for existing and prospective investors and limited
partners. Investors are arguably the most important part of the
private capital ecosystem. Therefore, catering to their desires
and demands is an absolute priority.

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