Cost Drives Equity Fund Managers to Make Changes

When managers of private equity funds changed service providers this year, cost, quality and increased portfolio complexity were typically behind the decision.

Preqin, a leading source of data and analytics about the alternative assets industry, says this year’s unusually challenging environment is prompting fund managers to more intensely evaluate their service providers. The relationship between cost and quality of service is being scrutinized especially closely.

“Managers,” Preqin comments, “Want service providers that can make a difference, whether that’s through streamlined processes, increased efficiency, or the adoption of innovative and value-add technologies.”

In a report out last week, Preqin discusses the results of its analysis and survey of fund managers. The short version is that among those changing law firms or accountants cost was the leading reason. Or, as Preqin described it, “Cost is king.

“Half of all fund managers surveyed cited cost as a reason for swapping their fund formation law firm, followed by 44% and 40% for transactional law firms and accountants respectively.”

Cost wasn’t the only reason. Portfolio complexity was mentioned as often as cost for changing fund formation law firms. And it was second behind cost as the reason for changing accountants.

Quality of service factored into the decision, though it was less of a driver than cost and complexity. However, among the 26% of private capital fund managers that changed administrators, the quality of service was a deciding factor. 53% mentioned that as a reason for making a change. Only one in five managers mentioned cost.

Preqin sees the issue for administrators as one of technology.

“From due diligence to investment monitoring and real-time reporting to LPs, processes across the alternatives universe will be streamlined and improved. Those service providers that fail to embrace emerging technologies will fall behind,” says Preqin.

Alternatives fund service providers - blog.jpg

In a sponsored Q&A with Tim Toska, global head of private equity at service provider Alter Domus, he talks about some of the unprecedented challenges private equity managers confronted this year, not the least of which was trying to build relationships remotely. Working remotely has demonstrated the critical importance of technology to fund managers.

“If you’re working remotely, you’re not able to handle everything, so having a strong service provider allows private equity managers to really focus more on the critical areas of their business,” he says.

In a second sponsored Q&A, this one with Nikolaos Perros, head of private equity at Citco Group, he makes the argument that after weighing the need to invest heavily in technology, many fund managers have chosen to partner with administrators that have already done that.

Cybersecurity, data conveyance and access to a digital portal to replace paper-based processes are the capabilities fund managers most need. “To deliver on these three aspects, as well as help firms evolve in a digitally driven world going forward,” Perros says, “Intimate technology expertise is a must for fund administrators.”

Photo by Ishant Mishra on Unsplash

Is Covid-19 Back or Are We Just Seeing a Surge in Cases?
General Interest Healthcare Pharma

Is Covid-19 Back or Are We Just Seeing a Surge in Cases?

Strategic Networking: A Secret Weapon in Job Searching
Accounting + Finance Architecture + Engineering Financial Services General Interest Healthcare Human Resources Information Technology Legal Support Marketing Technology Pharma Professional Support

Strategic Networking: A Secret Weapon in Job Searching

#WeAreGreenKey: Spotlight on Justin Nadelman
General Interest Green Key News Information Technology Leadership + Management

#WeAreGreenKey: Spotlight on Justin Nadelman

Navigating the Tech Interview Maze: A Guide to Success
General Interest Information Technology

Navigating the Tech Interview Maze: A Guide to Success

Green Key Unlocked: How to Succeed in Payroll Management
Accounting + Finance General Interest Human Resources Leadership + Management

Green Key Unlocked: How to Succeed in Payroll Management

#WeAreGreenKey: Spotlight on Jenny Rehkugler
Accounting + Finance General Interest

#WeAreGreenKey: Spotlight on Jenny Rehkugler

Handling Mistakes & Failure in the Workplace
General Interest Worklife

Handling Mistakes & Failure in the Workplace

How to Support Those Affected by Hawai’i Wildfires 
Green Key News

How to Support Those Affected by Hawai’i Wildfires 

#WeAreGreenKey: Spotlight on Halle Sarfin
Green Key News Professional Support

#WeAreGreenKey: Spotlight on Halle Sarfin

Advantages of Offering Exit Interviews
General Interest Human Resources

Advantages of Offering Exit Interviews

Tracking Metrics: Learning & Development
General Interest Leadership + Management Worklife

Tracking Metrics: Learning & Development

#WeAreGreenKey: Spotlight on Leanna Gallagher
Green Key News Human Resources

#WeAreGreenKey: Spotlight on Leanna Gallagher

How to Beat the Summer Productivity Slump
General Interest Leadership + Management Worklife

How to Beat the Summer Productivity Slump

Questions to Ask When Hiring a Recruiter
General Interest Leadership + Management Worklife

Questions to Ask When Hiring a Recruiter

#WeAreGreenKey: Spotlight on Chianté Vidal
Architecture + Engineering Green Key News

#WeAreGreenKey: Spotlight on Chianté Vidal

Celebrating 10 Years of GKR in Rockville
Green Key News Leadership + Management Professional Support

Celebrating 10 Years of GKR in Rockville

Internal Mobility: Retaining Top Talent
General Interest

Internal Mobility: Retaining Top Talent

Green Key Unlocked: The Future of Telemedicine & Virtual Healthcare
General Interest Healthcare Information Technology

Green Key Unlocked: The Future of Telemedicine & Virtual Healthcare

#WeAreGreenKey: Spotlight on Melissa Sanchez
General Interest Green Key News Healthcare Leadership + Management

#WeAreGreenKey: Spotlight on Melissa Sanchez

#WeAreGreenKey: Spotlight on Rory Valan
General Interest Green Key News Information Technology Worklife

#WeAreGreenKey: Spotlight on Rory Valan

Latest Blog Posts
View All Posts
Is Covid-19 Back or Are We Just Seeing a Surge in Cases?

Is Covid-19 Back or Are We Just Seeing a Surge in Cases?

With the recent increase in hospitalizations and Covid-19 cases across the U.S. the question of How to protect ourselves and...
Read More
Strategic Networking: A Secret Weapon in Job Searching

Strategic Networking: A Secret Weapon in Job Searching

Networking is more than connecting with other professionals on LinkedIn or collecting contacts; it's about building relationships that can lead...
Read More
#WeAreGreenKey: Spotlight on Justin Nadelman

#WeAreGreenKey: Spotlight on Justin Nadelman

Almost seven years since he first joined Green Key, Justin has seized many growth opportunities in his role and truly...
Read More