We are delighted to announce that Alter Domus has won the award for Fund Administration: ManCo Services at The Drawdown Awards 2023. Held in London on June 7th, the awards were judged by a highly experienced panel of leading industry experts and we faced strong competition in our category.

The award was accepted by Matthew Molton— Country Executive UK— on the night, with Andy Clark, Tim Trott and Sam Wade also present to celebrate our achievement. We are particularly proud that this award was given by a panel of leading GP and LP judges.

We are delighted to win this prestigious award, which reflects the quality of the services we provide and the trust our clients have in Alter Domus as their chosen ManCo provider.

Matthew Molton, Country Executive UK

This is the second consecutive year that Alter Domus has won the award for ManCo Services at The Drawdown Awards, following our previous win in 2022.

This news follows hot on the heels of Alter Domus being ranked one of the top-5 third-party AIFMs, and a top-10 third-party ManCo in PwC’s 2023 Observatory for Management Companies Barometer.

How have the issues facing private credit managers evolved in the past decade?

Andrew Kyung: The private credit asset class has seen significant growth over the last 10 years. The challenges for managers have become more com­plex in a variety of different ways. In addition to rapidly increasing interest rates, there have been notable increases in tax and reporting regulations and the general information needs of investors.

Greg Myers: Private credit managers comprise a much larger proportion of corporate lending and M&A lending compared with 10 years ago. As banks retrench, direct lenders are among the first group of people contacted when there is a big deal or borrowing require­ment from corporate institutions. Com­petition for those deals has increased and there is now an almost institutional expectation from borrowers that wasn’t there in the past when these funds were regarded as opportunistic lenders.

Now, the expectation is of a formal­ised infrastructure on a par with what borrowers would see from a large bank­ing institution, placing pressure on cred­it managers that did not exist a decade ago to build out the requisite platform to support direct lending operationally.

What are the biggest challenges and opportunities they face today?

AK: I think one of the biggest chal­lenges for managers is how to best col­lect data and use technology to stream­line workflows and enhance processes across the firm. Many alternatives man­agers have invested in some type of data warehouse for that purpose.

Identifying the right system to achieve those goals for credit invest­ments can be especially challenging due to the additional data points, cal­culation requirements and volume of transactions related to the asset class. Partnering with a good fund adminis­trator specialised in credit investments can make a big difference, and can help to find the right balance between lev­eraging technology and use of limited internal resources.

GM: Management companies need to decide how they are going to allocate staff, systems and costs in a world of limited resources. Do you build all that institutional grade infrastructure inter­nally or opt for external providers? Or is there some way to marry the two that differentiates you from other managers in terms of raising capital and meeting your reporting requirements? Given the breadth and depth of third-party service providers, many managers elect to build in-source/outsourced models that marry the best systems, internal and external resources.

How can fund administrators provide support to managers looking to keep their back-office functions efficient and compliant?

AK: It can be difficult to find a single service provider to augment what you would otherwise have to build in-house for accounting, operations, reporting and performance tracking for private credit investments. Investment ac­counting, fund accounting and investor accounting can require their own ded­icated systems. Fund administrators specialised in loans can enhance a cred­it manager’s ability to find a scalable solution and take advantage of these specialised systems.

GM: What is important for most as­set managers is to make sure the fund administrator has the systems to satisfy all those elements of their organisation and to enhance and support all those different areas of the business. Giv­en the different needs from the front, middle and back offices, it is important to consider the various requirements of those constituencies when selecting that administrator.

ESG has been a big theme in the past decade, and ESG data will be a big theme for the next decade. What do managers need from fund administrators in that area?

AK: For managers seeking to integrate ESG considerations and collect data points during the investment process and throughout overall portfolio opera­tions, getting that data into a system and a useable format is one of the best ways that fund administrators can help man­agers to leverage those with ESG goals.

GM: What managers need here really varies. Our systems are able to capture and track the different ESG data points, so it becomes a question of the extent to which it is collected and reported on. It is the ability of an administrator to track that data and report consistently on the results that provides the most valuable support to managers.

Ten years from now, what do you think credit managers will be focusing on in relation to ESG?

AK: Ten years from now, I think credit managers focused on ESG will be look­ing to see the impact on their invest­ments.

GM: Being a realist, I think there is going to be a divergence of managers based on their investor base. There are going to be ESG funds and non-ESG funds, and it will be interesting to see how the two perform when we look back.

I will be curious to see how the Se­curities and Exchange Commission and institutional investor groups agree to a coherent approach to ESG and DE&I, so it is hard to imagine how the approach will play out.

Which regulatory developments on the horizon will most impact private credit managers?

AK: I think there will be more convergence between US and international regulations. I imagine developments will continue to focus on tax and performance reporting. The growth of the asset class will likely lead to an increase in regulations specific to credit investment managers and direct lenders.

GM: Because of the proliferation of private lending across the US, a lot more states are going to start regulating asset managers’ direct lending to companies based in their states. That is going to become a big focus because that framework exists for banks but does not so far exist for direct lenders.

How is investor demand for private credit evolving over time, and what strategies and regions are currently attracting the most LP interest?

AK: Leveraged senior loan portfolios have been successful in a few forms and there seems to be some renewed interest in mezzanine funds. I believe LP demand for private credit continues to grow, but so is the competition for those commitment allocations. Manag­ers will need to continue to differenti­ate themselves. I think it helps to have the right mix of strategy offerings, and the service and technology infrastruc­ture to provide the information trans­parency and portfolio data investors desire.

GM: Credit is now a very well under­stood asset class compared with a dec­ade ago, so allocations will continue to increase, just as they have in private equity. Investors are going to maintain those allocations moving forward – a big attraction is that most of the assets are in variable rate assets, so they can track up as interest rates increase.

As far as regions are concerned, Eu­rope and North America continue to be strong. Asia will continue to have at­tractions for private credit managers as manufacturing leaves China for other parts of Southeast Asia.

On strategies, we see a growing number of asset managers focused on lending to funds, almost as a compet­itor to the traditional role the invest­ment banks played in providing sub­scription lines. That is a relatively new strategy, but the ability of managers to source and access leverage for funds has become increasingly challenged. Those credit lines that managers use to increase or enhance returns, or for the bridging of investor capital, will be a growth area for private credit in the next decade.

What have been the biggest drivers of the outsourcing trend to service providers in the past decade?

GM: There is a much better under­standing in the institutional investor space that these funds have certain expenses that need to be allocated to them, and that fits well with having an outsourced fund administrator model where those costs can be directly borne by the fund. You do not need as many internal staff to monitor the outputs of those external service providers, so it ensures a leaner infrastructure. Given skill shortages and the dearth of hiring talent, the other big driver is the access we provide to experienced profession­als.

AK: The ability to tap into technology that would otherwise have to be devel­oped in-house, alongside a stable ser­vice team, has definitely become more important through covid and an unex­pectedly more challenging post-covid era.

What will fund administrators need to do to stand out and meet manager demands in the next 10 years?

GM: The priority will need to be con­tinued capital investment in technolo­gy, systems and delivery mechanisms to get data out of fund administrators’ systems and into managers’ data ware­houses. The number one requirement for our clients is data.

AK: When it comes to data and tech­nology, managers and fund admin­istrators all seem to be at a common crossroads regardless of size. Every­one is trying to find a way to collect and use data to build efficiencies, cre­ate additional value and differentiate themselves. One of the biggest chal­lenges is finding the right mix of tech­nologies and services to achieve those objectives, at a cost that makes them scalable. 

This article was originally published in PDI's Decade of Outsourcing Report. Greg Myers is Group Sector Head of Debt Capital Markets at Alter Domus and Andrew Kyung is Controller and Vice-President, fund administration at AEA.

What are the key drivers for private markets to embrace artificial intelligence and other advanced tech?

The rapid growth and large size of the alternatives market has been matched by a growing amount of data that needs to be managed. As managers and funds get bigger, we are heading towards a point where that data becomes too much to handle, and we need more thoughtful discussions about how all of this information gets put to good use.

Secondly, the amount of data that is being demanded and delivered to GPs – even without that market growth – has broadened immensely. There are ever more reporting demands, whether they be ESG-related or linked to a greater need for transparency in certain aspects of the business, as well as in financial metrics.

Thirdly, the ultimate investors in the alternatives space are also demanding more information and transparency from their GPs.

All of this is happening against the backdrop of technology having rapidly evolved over the last five to 10 years. A lot of these demands to process more data – to use that data and to communicate that data more quickly – are happening just as the possibilities offered by technology are profoundly more expansive than they used to be.

A lot of tools that one needs to process this data are now available off the shelf from technology providers – especially from the cloud providers. Those providers have become a lot better at providing more than just software or hardware, and are instead offering enhanced computational capabilities, with AI falling into that camp.

So, demands have grown exponentially, and at the same time capabilities have come along significantly, which makes this a good time for private markets to embrace advanced tech. For a lot of participants, it is important to think about how to adopts me of this modern technology while preserving the investments made previously. We don’t have perfect information about how technology will continue to evolve, but anyone thinking about what to build today needs to consider their ability to pivot down the road as new technologies continue to emerge.

Is it now essential that private markets participants get on board with these tools?

Yes, it is, but the specifics will vary on a case-by-case basis. The more expansive and demanding the operation, the greater the need will be for investment and adoption of these tools and technologies, including big data warehouse platforms, modular application architecture, high speed computation and AI. More investors will be demanding more information, and portfolios will be larger and products more complex, and this means adoption needs to be more involved.

The extent to which managers get on board with these tools depends on what they really need in terms of modern tech and modern capabilities. A lot of firms could fall into the trap of overshooting and investing a lot more than they need to. Many will also fail to invest enough, and of course investment from the organisation is a lot more than just money, but also people, infrastructure, time and culture.

For a large expansive fund, it will be a big investment to adopt the tools to address complex problems, but a smaller operation may want to be a little more surgical in how much they adopt. Even so, the technology challenge does need to be addressed with modern tech, whether your fund is €300 million or €3 billion. Even a smaller fund, if they don’t think about this properly, could be building a trap around technology for the future, by making decisions now that in three years’ time will leave them with an archaic and unscalable infrastructure. It is expected that any technology transformation will embed some tech debt due to the nature of trade-offs that will need to be made, but it is also important to understand the extent of the tech debt that is being built into the system as part of the planning process.

Building a function for the future often involves wider discussion in the business to include key decision-makers. Unless you have a technology strategy in place that is consistent with the demands and expectations of your key stakeholders, you are going to encounter many challenges.

In my experience, almost every manager I speak to understands there is an organisational challenge around the technology capabilities of their institution. Even those at the beginning of the journey understand it is a complicated problem and a huge investment decision that should not be taken lightly. This journey is as much an organisational challenge as it is a technology challenge.

How can firms mitigate the risks associated with implementation?

The first risk is the risk of doing nothing. That is fairly significant, because it leaves you saddled with whatever you are doing now in a world where your competitors are surpassing you. The key question here is whether others around you are moving rapidly with advanced technology and whether you feel you are going to be at a disadvantage in terms of raising money, delivering performance, providing investor transparency and executing on decision-making if you fail to keep up.

The other extreme is the risk of diving into this with an old-school mentality, making a huge investment and simply laying out your requirements and asking someone to build you a solution. The concern there is that you expend a lot of resources to get something built and then find it is not really what you needed. Unfortunately, buyer’s remorse is not uncommon.

Another risk is building something good but not being able to maintain it. If you outsource the work and don’t really understand how it all operates, you may find out later that the total cost of ownership is exorbitant and the cost of changes is unacceptable. You want a solution that is manageable and nimble rather than unwieldy.

At Alter Domus, we work with our clients to approach tech transformations in stages, with discrete deliverables along the way. Success is users starting to see practical and usable solutions relatively quickly and often that they can begin using in their everyday work, which reinforces the project as stakeholders become more engaged.

A third mitigant is that solutions need to not be so intricately connected that the system is a monolith. It is preferable for the system to operate as a series of cogs that can be enhanced, replaced, or removed without impacting other parts of the solution. A lot of pieces need to be independent of each other but architected in a way that creates one elegant experience for the customer. Today’s technologies afford this possibility.

We are firm believers in building solutions for clients that can be maintained in a low-cost way. We don’t want our clients burdened with a system that will slow them down and prove costly to change and update.

What kind of shift in mindset is required to embed modern tech capabilities?

Going about this journey requires a cultural transformation, which needs careful change management that starts during the planning process. The possibilities and the limitations of the technology need to be understood. It begins with the leadership team to ensure that the organisation understands what is possible with technology alongside a focus on what the business really needs.

The change management aspect is also significant. The shift in mindset has to be around change being a good thing: we are going to be more efficient, and your job is going to be focused on more high-value activities. The organisation needs to communicate extremely well, manage expectations, and be ready for consistent enhancement and improvement.

What challenges with legacy systems might firms encounter and how can those be overcome?

A lot of legacy providers are on their own modernisation journeys, so it is important to understand how those systems themselves are going to be transformed, with some taking a more proactive approach than others. You may find that your legacy provider is not aligned with your technology journey. It’s wise to think about ways to adopt your modern technology and embrace it, without taking it for granted that all your requirements need to go through the legacy system. Maybe you can bypass your legacy system and find a new way to solve a problem. This would be a classic case of disintermediation for some legacy systems providers. If you think your legacy system is going to impair your ability to make decisions, it may be better to just start afresh.

But you definitely want the provider of your legacy systems, whether internally built or not, to be thinking about how they are going to modernise. If they are not, that may be a worrying sign.

What are the key elements to get right for a smooth transition to modern tech?

The key elements are communication, managing expectations and identifying early wins that will spur you on to the next phase. Breaking a problem into smaller chunks, with wins along the way, is really important. This is not a ‘one and done’; this never ends. You need to be always thinking about your total cost of ownership and what it is going to cost to not just build a new system, but also maintain it. Ask yourself all the time whether you are getting what you really want, which means being careful on your requirements, involving all your stakeholders, and being sure to build something that is really fit for purpose.

This article was originally published in PEI’s Fund Services Report.

We’re proud to share that we’ve been listed in PwC’s Observatory for Management Companies 2023 Barometer, and that this year’s results have seen our rankings increase significantly. 

In 2021, Alter Domus was ranked tenth in the list of top ten Luxembourg authorised AIFMs. The latest rankings show a notable increase; we’re now listed as fourth in the top five third-party AIFMs and eighth in the top ten third-party ManCos, as of December 2022. We’ve also been named a Top-5 ManCo managing Article 8 and 9 products.

What’s more, our Luxembourg ManCo AuM increased by 52% between December 2021 and December 2022; this represents the largest increase in our peer group.

Alter Domus offers end-to-end support for clients launching, managing and administrating regulated and unregulated investment vehicles. We offer our third-party AIFM Services in both Luxembourg and Ireland. To find out more about how we can support you in the alternatives space, please get in touch.

The acquisition bolsters and accelerates the ongoing transformation and expansion of the Alter Domus business

Alter Domus, a leading provider of tech-enabled fund administration, private debt, and corporate services for the alternative investment industry, has acquired Solvas, a leading loan and debt servicing software platform and services suite.

Developed over 20 years by Deloitte, Solvas serves major asset managers and trustee participants in the collateralized loan obligation (CLO) markets internationally and offers state-of-the-art integrated accounting, modelling, and credit risk solutions.

The acquisition of Solvas is the latest in a long line of strategic investments by Alter Domus in first-class technology designed to enable, support and accelerate the growth of its clients. It highlights the transformational journey of Alter Domus to being an increasingly tech-led organization.

The vast majority of Solvas’ 200+ skilled professionals have joined Alter Domus’ Data & Analytics unit. Founded in 2021 and led by seasoned industry expert Gus Harris, the unit supports investors and servicers through tech-enabled services designed to aggregate, analyze and derive insight from financial data.

The addition of Solvas strengthens and grows our suite of market-leading data and analytics products. Crucially, this enhances our ability to meet private capital’s relentless demand for better data and technology to support their decision-making process.

Doug Hart, CEO of Alter Domus

Looking ahead, Alter Domus will offer Solvas solutions and services to a broader set of investors, financial institutions, and servicers.

Thanks to our proprietary tech platforms, and everything it makes possible for our clients, we’re proud to share that we won the ‘Best Administrator – Technology’ award at the HFM European Services Awards 2023.

Hosted on 27 April at The Victoria and Albert Museum in London, the event was a celebration of excellence in European hedge fund services. Taking home this award means so much to our global team; developing and deepening our tech offering has been a key focus in recent years, and we’re proud to be recognised in this category.

Among the attendees accepting the award on behalf of Alter Domus was Head of Credit-Vision, Paolo Malaguti. Alter Domus acquired Credit-Vision in 2020; this platform for corporate credit investors has been integral to our growth in the data and analytics space.

Also accepting the award on behalf of Alter Domus were:

• Spencer Wells: Regional Director
• David Carol: Co-Head of Relationship Management Europe
• Juliana Ritchie: Head of Sales and Relationship Management, Debt Capital Markets, Europe
• Amit Varma: Operations Director, Debt Capital Markets, Europe

A huge thanks to HFM and to our brilliant clients, for choosing us as their partner in alternatives.

What challenges are faced by the alternative investment industry and how is Alter Domus helping its clients?

Generally, the alternatives industry is in robust health with demand for alternative strategies growing globally. According to Preqin, assets under management in alternatives will reach more than $23trn by the end of 2027, up from $14trn at the end of 2021. However, in the short term, there are difficult economic circumstances to be confronted, as inflation and interest rate rises are undoubtedly providing strong headwinds.

More fundamentally, we’ve recognised that our clients’ ability to scale their businesses has been hampered by outdated legacy technology, steep operational costs and tough labour conditions. As trusted partners of the world’s leading alternative investment managers, removing these obstacles to growth is our absolute focus.

Indeed, Alter Domus is in the middle of a transformational digital journey that is changing the scope, scale and impact of the solutions we offer. Where once Alter Domus was just a fund administrator, we have reimagined our business across the whole data and information chain, seamlessly connecting back to front offices through technology – our vertically integrated service offering is entirely unique in today’s market.

What role has technology played in Alter Domus’s ongoing transformation?

Our aim is to empower our clients with tech-driven solutions and tools that give a clear advantage to their investment and risk management decisions, with fully digitalised and integrated workflows, platforms and analytically ready data that hits new levels of accuracy, speed and transparency.

There are three distinct strands to our tech strategy: the acquisition of cutting-edge, data-driven companies; partnering with best-in-class platforms such as eFront and Yardi; and the proprietary development of world-class tech solutions, unmatched across our industry, from CorPro, to VBO or Agency360.

To get an idea of the scale of our tech transition, our ‘Accelerate’ programme, launched in 2020 with a $125m investment over five years, will utilise technology to transform our core activities and create new data assets for our clients across different geographies, funds and product types.

What kind of innovative new services is Alter Domus offering?

Our drive for innovation and customer value is reflected in the establishment of our data and analytics team in the last 18 months. The data and analytics team’s SaaS solutions utilize automation and machine-learning capabilities to reduce or remove issues caused by data acquisition, storage, analytics and distribution across investors’ entire portfolios.

The game changer is that the data and analytics team treats data agnostically; Alter Domus no longer must be the fund administrator for our clients to service aspects or all of their data – almost any kind of documentation needed for private credit, CLO management or by asset owners and asset managers can now be extracted, monitored, analyzed and reported on using our services. It’s a brilliant reflection of the rapid, impactful changes occurring across Alter Domus – changes from which our customers will reap benefits.

This article was originally published in The Drawdown’s Fund Administration Special Report.

Amid today’s macroeconomic uncertainty, what operational improvements should GPs make to maximize efficiency?

A greater focus on manual, repetitive jobs that take excessive time. Tasks such as downloading and processing external documents, KYC checks, payment initiations, accounting entries, and waterfall calculations are ripe for improvement by automation, outsourcing, or a combination of both. This allows managers to take advantage of the digital providers specialized in making organizations as efficient as possible. This efficiency isn’t gained by reducing costs but by providing employees with the capacity to focus on additional value-add tasks that have a greater impact.

How can these improvements result in more informed decisions?

Operational improvements alone won’t result in more informed decisions. A firm needs to have the right people. Operational improvements provided by tools like AI and automation eliminate the manual, time-consuming effort to locate data, run analysis, and compare it with the market or industry. These improvements allow teams timelier analysis without sacrificing depth, breadth, or accuracy. This in turn allows for better identification of investment and exit opportunities.

What opportunities do you see for GPs to improve productivity by investing in new technologies?

Over the past three years, there has been a focus on technology to bring people and data together. Now, there’s a focus on using data in unstructured formats effectively or running processes with decisions similar to those made by humans. Being able to identify the shared value of technologies like AI, OCR, automation, or blockchain, and continuing to invest in them allows entrepreneurs to continue to innovate.

What specialized needs do you see from different kinds of private equity funds?

Fund of funds managers are unique in that their interactions between front office, back office, middle office, and investors is predicated by the ability to source and analyze data at both the fund and portfolio company level. Therefore, one of the specialized needs for a fund of funds is the ability to efficiently download, store and process notices and statements using automation and OCR. This would allow for greater focus on analyzing the data, rather than simply retrieving.

The needs of buyout and growth managers are slightly different as they look at information provided to them at a portfolio company level, which typically lacks consistency. These managers’ needs are more focused on the ability to not only process but standardize the financial data across their portfolios to provide their teams with consistent data metrics. This is a critical step to allow for more informed and timely decisions downstream.

How can funds improve the back-to-front office infrastructure and what benefits would that yield?

The first step to improving the infrastructure is understanding the source of data and how it interacts with back-to-front office. It’s a three-legged stool: there’s data management, data extraction, and data visualization. Internally, a firm must determine where the data resides and how it can be shared across the firm among all stakeholders.

A comprehensive data management solution for any size fund manager would allow for better, more consistent, and informed decision-making, efficient handling of requests within a firm or to investors, and better monitoring of metrics at firm, fund, and investment level. At Alter Domus, we have had the unique opportunity to work alongside our clients and leverage other resources to assist in these transformational journeys and see the benefits they yield.

This article was originally published in Preqin's Private Equity Quarterly Update for Q1 2023.

The piece examines the country’s evolving needs and challenges across sectors such as recruitment and healthcare, and the unconventional investment opportunities this shift creates. Scott highlights that the Japanese government is now taking steps to boost the population by encouraging immigration—up almost 44% since 2015.

What could this increase make possible for Japan’s economy—and how can investors benefit?

The Japanese government has historically been reluctant to open those gates, but this is slowly changing.

Scott Reynolds, Country Executive Japan

This article was originally published in Private Equity International.

Alan identifies three key drivers that are opening up new opportunities for investment managers, from the continuing democratization of alternatives to a growing focus on ESG. He also examines why Luxembourg’s alternatives community is still ambitious and why the jurisdiction continues to hold significant attractions for investment managers.

Investment managers looking to raise capital in Europe have traditionally looked and will continue to look to Luxembourg to establish their fund and operating platforms.

Alan Dundon, Director, Sales & Relationship Management

This article was originally published in Delano.