*THE BUILDING BLOCKS OF A PRIVATE MARKETS ECOSYSTEM*
Jason Almeida, Senior Partner & Head of LP Services at Alpha Alternatives, Alpha FMC
By now, it’s been well-established that private markets will continue to occupy a larger and larger slice of institutional investors’ portfolios, offering additional diversification against a broader appetite for illiquid assets that have the potential to deliver higher returns.
The global alternatives industry is forecast to exceed $30 trillion in assets under management by 2030, according to Preqin. But to be able to effectively allocate and manage these investments as part of the whole portfolio, firms need technology and data that will bring standardization and more efficient workflows to a landscape still predominantly operating on manual workflows and inconsistent data.
of respondents agree that, within their organization, teams should share a common data language to create value.*
*Source: Reuters/Aladdin Brand Image Survey 2024
In many ways, the industry is starting at square one, poised to traverse entirely new territory—to create a codified market structure that will be transformative. But progress will necessarily be incremental. And it will be crucial for tech that unifies investments across asset classes to develop the capabilities that will drive the industry forward.
Data is at the core of this vision.
Because the management of private markets investments lacks the level of structure and accessibility that govern public markets (viz. data or otherwise), firms are hindered by an inability to scale and provide the best outcomes for their clients. Whether pension funds, sovereign wealth funds, insurance companies, or high-net-worth individuals via wealth managers, these investors require better access, transparency, and liquidity in their private market investments.
In our view, today’s processes are simply not sustainable for the scale at which allocations to alternative investments are expected to grow. Technology has historically driven significant changes in investing—and private markets are at an inflection point. The vision is to create a seamless and integrated ecosystem where private market investments can be managed with the same level of sophistication and transparency as public market investments. That advancement will come through both product evolution and analytics, such as risk-based asset allocation models that operate across the whole portfolio and consider different economic scenarios—through research and actionable insights that empower confident decision-making across the investment lifecycle.
Within this paradigm, the crucible for success will be data standardization.
The industry will need to work toward creating a common language and standard set of practices that can be adopted by the whole ecosystem. Digitization and standardization go hand-in-hand, providing another layer of structure, and moving away from paper-driven, manual processes to drive greater efficiencies.
But successfully establishing this robust, foundational infrastructure will require buy-in and collaboration across the board, including investors, technology providers, and other stakeholders. To that end, interoperability is key to establish collaboration across the ecosystem.
INNOVATIONS
Private markets data meets investment workflowsBy integrating Preqin and eFront, BlackRock provides benchmarking data, research, and investment tools for fundraising, deal sourcing, portfolio management, accounting, and performance—all in a unified platform.
Unlocking client collaborationeFront Provider is a new collaborative platform that establishes a common language between asset servicers and asset managers, enabling seamless collaboration and data exchange for private markets fund administration—allowing users to find solutions together on shared workflows that streamline fund operations, reduce operating risk, and increase data transparency.
Private markets analyticsPreqin’s Allocator Hub is an end-to-end private markets analytics platform that enables investors to accelerate asset allocation, manager selection, and portfolio management workflows by streamlining the most time-consuming, costly, and analytically challenging investment processes.
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Both standardized data and standardized APIs (which allow applications to communicate and share data with each other) will enable different systems to integrate seamlessly—reducing the reliance on manual intervention, making it easier to automate processes, and ultimately, making investing in private markets more efficient and scalable.
Going beyond this foundation, a key shift to enable better client outcomes is expanded access.
As noted, interest in alternative assets is only projected to grow, and the industry will need to develop innovative solutions to provide better access and liquidity. This includes creating fund structures that are more accessible to wealth investors and providing interim liquidity options.
With more investors coming into the space, institutions—whether wealth management shops or pension plans et al—will require a tech platform that will not only support these new products, but also cater to their specific needs.
For instance, retail investors typically need different types of reporting than institutional investors.
And wealth firms will need support through data and education to distribute alternatives products to the end investor.
For organizations to scale in private markets across a diverse range of investor types, they’ll need data management, analytics, and workflow tools that can meet investors’ varying requirements.
This won’t be easy—or quick.
But emerging tech has a role to play in enabling a higher level of automation and data extraction (and insights) on clients’ behalves, creating even more efficiencies while helping investors reduce risk.
As Sudhir mentioned in the beginning of this paper, platforms like Aladdin—when combined with eFront and Preqin—are already unlocking value across public and private markets by harnessing emerging tech to drive innovation.
And we’re just getting started.
