Considering the transformational possibilities of artificial intelligence on fund operations —the right applications can do everything from reduce costs to help generate new revenue — it may come as a surprise that only 14% of fund executives surveyed by information service Private Funds CFO have implemented AI technology into their portfolio companies. Perhaps more startling is that more than half of respondents said they had no plans to adopt AI in the next year.

For Alter Domus Head of AI and Automation Davendra Patel, that looks like a missed opportunity, especially with areas such as risk management, due diligence, and performance tracking ripe for AI integration.

In a recent interview with Private Funds CFO, Patel said that in the current economic climate, AI is a pivotal tool for gaining a competitive advantage. That’s a view his own company has taken to heart: Alter Domus has created its own versions of ChatGPT and integrated generative AI to automate data from various sources, providing real-time information and insights to clients.

Patel, who has 30 years of experience in IT, acknowledges the potential security risks around AI, including the threat of shared information becoming leaked information. By developing proprietary tools, Alter Domus has optimized data safety. In addition, in-house experts continuously monitor the Alter Domus system for vulnerabilities and breaches.

“We focus on regular reviews, audits, and ethical considerations to ensure AI’s responsible and safe deployment,” Patel told Private Funds CFO.

“It’s essential to balance AI’s potential with practicality, focusing on both immediate gains and long-term benefits.”

Read the full article here.

We’re proudly sponsoring the 9th International Funds Summit & Expo in Cyprus on October 23 and 24.

The summit brings together investment fund professionals from around the world to discuss the evolving regulatory and increasingly competitive landscape in the global asset management sector and much more.

On Day 2, Evdokia will moderate the panel discussion “The Future of Funds Administration”, where experts will explore how the future of fund administration is posing unique regulatory challenges, especially in smaller jurisdictions.

Meet our team at our Alter Domus booth and discover how our solutions can meet your needs.

We are delighted to be attending the EXPO REAL 2023 in Munich on 4-6 October. Our very own Mark Gebauer and Dirk Sanden are looking forward to meeting old and new clients and discussing the evolving opportunities and challenges shaping today’s real estate markets.  

Also attending? Get in touch to learn more about Alter Domus’ real estate services and uncover how our solutions can meet your reporting and analysis needs.

What are some of the key considerations when identifying the right service operating model for your company?

Your operating model and managed services provider need to be able to accommodate your future growth plans. If you are considering moving into new jurisdictions, asset classes or strategies, they need to be able to flex accordingly to support that next step for your company. Crucially in today’s data-driven environment, you also want to think about your data and technology needs. Investors are demanding real-time access to information and transparency. Do you want to take on the cost and responsibility of building and maintaining the capability to provide that in-house? Many asset managers are engaged in M&A activity, which is a logical moment for a fundamental rethink of your operating model.

How is traditional outsourcing changing?

The need to access data is driving change – for the better in our view. We’re moving away from a commoditized and transactional type of model towards operationally integrated partnerships, where there’s transparency and access to data in real-time. We’re also seeing some consolidation and rationalization of partnerships. Where perhaps a manager might have had multiple fund administrator partnerships in the past, now they might have one or two deeply embedded partnerships that can cover all the jurisdictional and sector specialisms they need globally.

Co-sourcing is a relatively new concept. What is it and why might firms consider it?

Essentially, co-sourcing is an operating model where the manager maintains an in-house data and technology stack that their administrator has access to and can create and modify primary data elements. It’s a hybrid model between fully outsourced and fully insourced. The benefit it offers managers is that it allows total control and ownership of their data and real-time access to it, while tapping into the asset class and systems specialists, and talent acquisition capabilities of a fund administrator, all while reducing manager level overheads.

Beyond co-sourcing, in what circumstances might a full lift-out be the right solution for a company?

That partly depends on whether, as a manger, you have the scale and appetite to reinvest in your own technology and in-house operations or not. There are considerable advantages to partnering with a provider who constantly upgrades their technology platforms and can provide a long-term career path to valuable internal resources. There are also the economies of scale and best practices that a global administrator can offer, without being distracted by the challenges of maintaining a back office. We’ve seen great success for both clients and personnel as we’ve created a playbook to successfully assist with these types of full lift-out transitions.

With this evolution in mind, what should a company be looking for when choosing a service provider?

Ultimately a good administrator is focused on white-glove levels of service and forming a deep partnership with their clients, which will include customizable solutions and specific asset-class expertise that meets specific needs. An administrator should be viewed as a critical member of the team, who when leveraged correctly delivers significant value-add to portfolio, risk management, and investor teams. Critically, you need to have confidence that they are technologically innovative, as well as culturally a good fit for your organization.

This article was originally published in Preqin's Service Provider Report.

Angela Summonte is attending Pension & Investment’s World Pension Summit in The Hague from 10-12 October. She will join a range of pension fund executives and other industry experts to discuss the best practices and key strategies driving growth for pension funds around the world. Meet her at the conference to learn more about how changes across technology, financial markets, the environment, and society are transforming opportunities, and how Alter Domus is supporting the evolution of the sector.

Get in touch with Angela ahead of the summit to find out how Alter Domus’ Asset Owner Solutions can support your ambitions.

What macroeconomic drivers do you see influencing the infrastructure debt market share?

The COVID-19 pandemic and energy crisis both brought a lot of attention to the infrastructure industry, pushing the ESG agenda and increased investments into renewables. Currently, investors seem to be rebalancing their portfolios away from core strategies to avoid the adverse impact of higher interest rates, and toward higher-yield core-plus strategies. In this context, infrastructure debt is gaining popularity, notably because of its highly attractive risk-adjusted returns.

What opportunities and challenges does infrastructure debt bring LPs in more stringent markets?

Competition is certainly increasing, with both traditional equity and established debt investors coming into the space. There have been a lot of new players drawn in by the opportunities that infrastructure debt offers. This increasing competition also extends to competition for the right assets.

It is likely the space will see more capital concentration in the market as larger firms pick up the bigger projects. On the other end, many new players are coming to market with smaller funds and pushing for projects in emerging sectors, particularly renewables. In the next five years, we will likely see even more smaller participants entering the industry with stronger specialization in these verticals, which can be good news for investors. Diversification is always attractive – not everyone necessarily wants to put all their eggs in the “larger firms” basket.

What should LPs new to infrastructure debt know about entering a niche market?

One needs to keep in mind that niche markets like infrastructure debt often have specific needs and characteristics. Infrastructure and debt managers will certainly be knowledgeable, but combining the two components may present a learning curve for some. Infrastructure debt funds can prompt more involvement from the administrative side, in particular around loan servicing or portfolio monitoring.

Efficiently managing a loan portfolio and its revenue base requires a solid understanding of debt, but equally as important is the ability to gather, aggregate and analyze data related to the loan portfolio, the borrowers and agreed covenants. This is what allows managers to gain insights into the portfolio’s performance, flag any credit risks as early on as possible, and simply take timely and informed portfolio management decisions.

Both managers and LPs need to ensure their back and middle offices adapt to fit the needs of a multilateral strategy, and ensure that their tools, systems, processes, and their team’s skill sets are in place, either in-house or through the use of external resources.

How can infrastructure debt evolve as the US puts more energy into national infrastructure projects?

Infrastructure has always been a way for governments to spend themselves out of a crisis, create jobs and get the economy back on track. Over the past two years, the US legislator voted on two major Bills which have contributed to raising the US market’s appeal among global infrastructure investors, specifically to accelerate the energy transition. Governments will partner with the private sector to execute on these projects, including with private equity types of investors.

Of concern, however, are both the availability and cost of debt, and the fact that many banks seem reluctant to finance anything riskier than core strategies. Consequently, many managers are looking at non-bank lenders and debt funds to finance new projects or to refinance existing ones. This opens up a lot of opportunities in this niche asset class.

This article was originally published in Preqin’s Infrastructure Quarterly Update.

What facilities of data collection do you believe will become prevalent in a more stringent market?

While navigating the extreme volatility in the current market, data collection facilities will be geared toward traversing three key mega trends. The first is the emerging convergent industry model. The financial, administrative, and advisory sectors are morphing together to create a new business model that will require a more integration-based approach to data collection.

Secondly, sovereign wealth funds (SWFs) are looking to shift more in private equity investment. This transition will demand greater due diligence around compliance and guidelines.

Finally, ESG conditions are becoming an important facet of SWF investing. As such, many firms have set out to eliminate their carbon emissions by 2050. All these trends require an evolved level of data analysis that will set the course for data collection in the future.

How can clients utilize and incorporate data to navigate market turbulence, particularly vehicles with lower-risk tolerances like SWFs?

Future data collection will need to introduce a new tool kit, ensuring data is not only collected, but organized in a way that can be assessed efficiently and offers investment insights. New technologies will play a big part, helping to deliver a deeper form of data retention. The industry demands data-driver models that incorporate traditional and non-traditional research sources. For example, social media can now serve as an insightful resource. Moreover, the industry must look for ways to blend machine learning, such as AI, and human efforts. These practices work best when automation is performed with AI to optimize data gathering, and then humans weigh in on analysis.

Can sustainability extend to data collection? If so, how do these changes vary for funds with more robust regulations?

Sustainability initiatives are challenging for more regulated clients, such as SWFs. Now, information linking ESG resources and financial performance lacks consistency and transparency. We see many initiatives around regulations to establish more transparency and even create a potential benchmark.

One initiative is ESG data convergence, which would demand both GPs and LPs agree to report and collect the same ESG metrics, from board diversity to carbon emissions. Ultimately, it is a matter of defining the data points that can be collected and monitored in the same way, then normalizing them. It isn’t easy, but there is a lot of attention around the topic.

What impact do you envision this form of sustainability practice having on the private sector as a whole, or the data collection industry specifically?

Data collection around ESG will influence other sectors by providing comparable information to the private sector and establishing a coherent marketing approach. These sustainability practices will also need to be specific to the client. The same data points won’t be relevant across all strategies in the private sector. It will be about identifying which data points are relevant to the specific underlying assets.

This article was originally published in Preqin’s Sovereign Wealth Funds Report.

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.