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Navigating Competitive Fundraising in 2024: The Crucial Role of Outsourcing Operations

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Daniel Trentacosta, Managing Director, Head of Private Markets and Change

As we enter 2024, fund managers in the alternative investment market face intense competition for capital and challenges in effectively investing that capital. These challenges are not new, yet they continue to be a concern. With changes in various aspects of alternative firms’ middle- and back-office footprint, including valuations, human capital, technology, legal and compliance, and operations, it is more important than ever for alternative investment managers to display operational excellence.

Recently, we spoke with Daniel Trentacosta, Head of Private Markets and Change at MUFG Investor Services, who believes that fund managers can position themselves for success in the coming years if they have the right partner to address operational complexities.

“As fundraising continues to be more competitive and managers deal with continued volatility and uncertainty on a macro level, a trusted fund administrator becomes pivotal in addressing the multifaceted needs of fund managers,” Trentacosta said.

Data from Preqin shows funds collectively raised $145.3 billion on their final closes for 2023, a 19% increase on the same period last year[1], Trentacosta said, adding, “By outsourcing back-, middle- and even some front office functions, fund managers will spend more time driving value and increasing returns for investors.”

Increased outsourcing allows them to relinquish certain operational tasks and refocus efforts on fostering investor relationships and strategically positioning their portfolios for greater success.

Strategic Outsourcing: A Competitive Edge
Investors are demanding greater visibility into fund activities. Outsourcing to a specialized fund administrator can help improve transparency and reporting mechanisms. By leveraging the technology and expertise of a fund administrator, alternative managers can focus on raising capital while satisfying investor demand for comprehensive reporting.

The regulatory landscape for fund management is constantly evolving, making it challenging to stay compliant. Working with a trusted partner can help fund managers meet new regulatory requirements, mitigate compliance risks, and proactively adhere to industry standards. With extensive experience across different regulatory regimes and evolving requirements, a reliable fund administrator’s team of experts can help ensure managers are covered.

Portfolio Performance Acceleration
Eliminating manual processes and automating operational tasks can reduce risks and costs associated with middle- and back-office operations. Outsourcing functions across the operations spectrum, but also including systems management, data processing, and establishing effective integration with existing technologies, is critical to operational efficiency. For example, MUFG Investor Services offers flexible, scalable, and streamlined solutions to manage complex portfolio strategies, multifaceted fund structures, and evolving global regulations.

When selecting an outsourcing partner for administration, it is crucial to consider the stability and breadth of solutions being offered. Mitsubishi UFJ Financial Group, Inc (MUFG), is one of the world’s largest banks with approximately $3 trillion in assets, and as a result, MUFG Investor Services can offer clients an extensive, dynamic suite of banking services and financing, foreign exchange, and regulatory services in addition to the foundational asset servicing and fund administration. We customize solutions based on our clients’ goals and focus on gaining a deep understanding of their portfolios so we can serve as an extension of their organization.  That extension is born from becoming an excellent cultural fit with our clients, especially when they outsource services to us, and our teams collaborate closely with each other daily.

Thriving in Complexity
Given the dynamic fundraising landscape anticipated in 2024, the strategic move for fund managers is clear: Embrace outsourcing to trusted partners as an investment in resilience, adaptability, and sustained growth, enabling them to free up valuable resources to focus on capital raising strategies. “Success in fundraising goes hand in hand with strategic decision-making,” Trentacosta said. “Outsourcing is not just a solution; it’s a roadmap to navigate the path towards generating returns and operational efficiency, leading to a more attractive investment for prospective clients.”

[1] Preqin 2024 Global Report: Private Equity

This article was originally published in The Alternative Investor. Access the full January edition of The Alternative Investor by clicking here.