An overview of the key themes shaping private equity, private debt, real estate, and infrastructure as private markets enter 2026. The outlook highlights where opportunity is emerging, where complexity is increasing, and what investors and managers will need to navigate in the year ahead.
Long-awaited green shoots are emerging in exit markets – much to the relief of private equity GPs and LPs.
Even if exit markets rally, there will be no going back to “business as usual” for the asset class.
Continuation vehicles and non-institutional investment have become established parts of the industry and are reshaping how GPs invest and operate.
GPs are eager to seize these new opportunities but will have to level up operational models in order to do so effectively.
Elliott Brown
Global Head of Private Equity
Private equity at an inflection point
After a prolonged period of stalled exits, cautious capital deployment, and repeated false dawns, private equity enters 2026 at a genuine inflection point. Exit markets are reopening and deal momentum is building, but the next phase of the cycle will not mark a return to the pre-2022 status quo. Instead, structural shifts in liquidity options, fundraising dynamics, and investor composition are reshaping the contours of the asset class. For general partners, success in 2026 will hinge not simply on a market rebound, but on adapting to a permanently changed private markets landscape.
A reopening market — and a redefined industry
After a long wait and many false starts, private equity GPs are quietly optimistic that 2026 could be the year deal activity finally cranks back into gear.
In recent years GPs have grown weary of predictions of upcoming “waves of M&A” that never materialize, but as the industry moves into a New Year, forecasts of a ramp up in buyout and exit activity feel more real.
Momentum has already been building rolling into 2026, with Q3 2025 global buyout deal value posting the best quarterly figures since the 2021 market peak. Global IPO markets are also simmering, with J.P.Morgan anticipating that up to a third of IPO activity in 2026 could involve private equity sponsors.
Leveraged finance bankers, meanwhile, are betting big on a buyout bounce, having underwritten close US$65 billion of debt to finance big ticket buyouts in 2026, according to Bloomberg.
Exits are back on
The reopening of the IPO window and a reenergized M&A market will offer private equity sponsors with a long-awaited opportunity to exit assets held for much longer than expected.
Global exit value was already up more than 80 percent year-on-year through the first nine months of 2025, and fully functioning IPO and M&A markets bode well for further gains in exit value in 2026.
A meaningful increase in exits can’t come soon enough for managers, who are sitting on 31,764 unsold assets, according to Ropes & Gray figures.
Clearing this backlog will be essential for a recovery in fundraising, which plumbed five-year lows for the Q1-Q3 period in 2025, according toPEIdata.
Increasing distributions will help to clear liquidity bottlenecks and put fundraising timetables back on track in 2026. The good news is that 2025 may represent the bottom of the fundraising cycle, with fundraising moving into recovery mode in 2026, according to Cambridge Associates.
GPs may have heard it all before, but this time optimistic expectations do appear to be grounded in a degree of substance.
A new-look industry
But even if the mainstream portfolio company exit sluice gates do open up in 2026, there will be no going back to “business as usual” for private equity managers in the year ahead.
The cycle of rising interests and the associated exit logjam of recent years have changed the way the industry works for the long-term. The alternative liquidity routes managers and their advisers have devised and refined in recent years have become part of the industry establishment. GPs are not going to mothball these tools – even if IPO and M&A volumes bounce back beyond expectations.
Continuation vehicles (CVs), for example, now represent around a fifth of private equity distributions to LPs, and are not only a liquidity solution for downcycles, but a channel for retaining exposure to crown jewel assets through longer hold periods. Indeed, asset manager Schroders sees CVs potentially replacing sponsor-to-sponsor secondary buyouts in some scenarios.
For LPs, who will be invested across multiple funds and managers, a CV deal makes sense if the alternative is a secondary buyout sale to a fund that is also in an LP’s portfolio. For GPs with funds that are maturing, a CV allows them to hold onto prized companies, extend proven investment and portfolio management theses, and bring in capital and liquidity without having to sell to another private equity firm.
Private equity firms that haven’t yet implemented CV deals will have to start selecting some assets for CVs in the future. Managers that have executed CVs, meanwhile, will almost certainly do so again.
Increased use of CV funds is also bringing increased scrutiny. A recent New York Times analysis has highlighted growing investor focus on valuation transparency, governance and alignment in continuation vehicle transactions.
Just as exit options have evolved, so has fundraising. Non-institutional investment in private equity has well and truly arrived and will keep on growing in the next 12 months. A financial adviser survey led by private markets manager Adams Street found that more than two-thirds of respondents expected the percentage of their clients invested in private markets to increase during the next three years, while Bain & Co predicts that non-institutional capital will be one of the major drivers for private markets assets under management (AUM) growth during the decade to 2032.
Global themes. Regional nuances.
The overarching themes of an improving exit outlook, alternative liquidity options, and non-institutional capital will carry across all key private equity jurisdictions in 2026, but regional differences are also set to emerge. In the US, three interest rate cuts in 2025, a boom in AI-investment, buoyant stock markets, and highly supportive debt financing markets will put the US to retain its position as the most dynamic and active private equity market globally.
Shifts in domestic policy in the US, however, have positioned Europe as a good option for private markets investors seeking to diversify US exposures. European leveraged buyouts have also consistently traded at lower multiples than in the US in recent years, according to CVC, providing ongoing attractive relative value for dealmakers.
Asian private equity dealmaking and fundraising, meanwhile, is set to take on a more domestic hue, with deal activity shaped by specific themes in local markets.
In the key China market, for example, which has had to navigate less predictable US-China relations in 2025, local Chinese firms and pan-regional funds look set to drive activity and take advantage of very strong IPO markets for exits and attractive entry multiples on new deals.
Japan, by contrast, is expected to see sustained interest from global players as corporate reform sees large Japanese conglomerates unbundle non-core assets and streamline operations, filling the pipeline of prospective carve-out deal opportunities.
A buoyant IPO market in India, supported by local pools of capital, meanwhile, is set to continue supporting a positive backdrop for private equity exits, which climbed to close to US$20 billion through the first nine months of 2025 – ranking 2025 as the second-best year for India exit value with a quarter of the year still to go.
Adapting to change
A wider range of exit options and the rise of non-institutional investment in private markets will demand that managers across all jurisdictions lay down new rails to run their businesses.
In addition to managing close-ended institutional funds, private equity firms will also have to operate the evergreen fund structures that continue to gain popularity as a conduit for private wealth into private equity. This will come with additional reporting obligations, the publication of more regular NAV marks, and the monitoring of liquidity sleeves. Managers will also increasingly be expected to update LPs in institutional funds about how investment resources and deals are allocated between institutional and evergreen funds. Adams Street notes that the number of evergreen funds doubled to 520 vehicles in the five years to the end of 2024. Private equity operations will have to be primed to respond to this growth.
LP expectations around the granularity and frequency in investor reporting will also see a broader step change in the year ahead. A Ropes & Gray industry survey of European LPs and GPs, for example, found that more than a third of LPs (36.6%) see transparency and reporting, and insufficient or delayed data sharing and communication, as the biggest source of tension in LP and GP relationships. In an increasingly competitive market, GPs will have to step up and address these concerns.
As a new dawn beckons for the private equity industry in 2026 – laying the necessary operational foundations will be essential for seizing the opportunity.
Conclusion
Private equity enters 2026 at a genuine turning point. Exit markets are reopening, liquidity options have broadened, and new sources of capital are reshaping the industry’s growth trajectory. Yet this is not a cyclical reset to old norms. Structural changes in exits, fundraising, investor composition, and fund structures are now firmly embedded in the private markets ecosystem.
For GPs, success in the year ahead will depend not only on capturing renewed deal and exit momentum, but also on evolving operating models, governance frameworks, and reporting capabilities to meet higher investor expectations. Those firms that adapt early and invest in scalable, resilient infrastructure will be bets positioned to convert improving market conditions into durable long-term advantage.
As 2025 draws to a close, private markets continue to reflect a year of shifting macro conditions, uneven activity across asset classes, and a stronger focus on liquidity and portfolio management. This review outlines the key trends that shaped private equity, infrastructure, real estate, and private debt over the past 12 months.
Private equity dealmakers endured a volatile year, as tariff changes put the brakes on an encouraging start to 2025.
With hopes that 2025 would herald an M&A revival put on ice, pressure on GPs to clear portfolio backlogs and make realizations remained unrelenting.
Continuation vehicle volumes continued to climb as managers made full use of the alternative exits routes available to them.
Fundraising remained challenging, as LPs held off from backing new funds liquidity and program cash flows improved.
Positive sentiment did begin to build in the second half of the year, with banner deals in Q3 2025 boosting year-on-year deal value comparisons.
Elliott Brown
Global Head of Private Equity
A Year Defined by Resetting Expectations
The private equity market entered 2025 with optimism that early signs of deal momentum, stabilizing valuations, and modest improvements in liquidity would translate into a sustained recovery. But as the year unfolded, shifting macro conditions, uneven policy signals, and persistent portfolio pressures forced managers to recalibrate those expectations. While pockets of activity strengthened − particularly in later quarters − the broader environment remained characterized by caution, selective dealmaking, and a continued focus on managing through legacy backlogs. This backdrop frames the dynamics that shaped GP sentiment and market behavior across the remainder of the year.
A Slower Than Expected Deal Recovery
GPs’ hopes that 2025 would finally be the year that private equity M&A activity rallied, never quite materialized, as shifts in US trade policy and volatile stock markets put the deal recovery on hold.
Despite the DOW reaching all time highs, the last 12 months have not been easy for private equity managers, who started 2025 with the expectation that flattening inflation and interest rate cuts in key markets would signal a turn in deal activity figures following a 36-month period of declining buyout transaction flows.
US tariff announcements in April, and the subsequent market dislocation, dashed any hopes of a deal revival in 2025, but in the final two quarters of the year, once dealmakers had assessed the impact of tariff shifts on earnings and portfolio companies, buyout activity did show signs of improvement.
Global buyout deal value for Q3 2025 hit US$377.34 billion, according to Dealogic figures analyzed by law firm White & Case – the best quarterly figures recorded since the market peak of 2021 and 59 percent above Q2 2025 totals. This lifted the buyout deal value for the first nine months of 2025 to US$911.04 billion, bringing it in line with full-year figures for 2024 and putting the buyout market on track to exceed US$1 trillion in annual deal value for the first time since 2022.
Landmark deals – most notably the $55 billion take-private of video game developer Electronic Arts in the biggest leveraged buyout in history – also pointed to an improving backdrop for buyout deals.
After the initial tariff announcement shock, dealmakers gradually returned to business as the global economy rode out tariff disruption and interest rate cuts in the US, UK and Europe filtered through capital markets and brought down debt costs, facilitating more affordable deal financing.
Fundraising lagged deal rebound
The uptick in exit activity, while encouraging, was not large enough to put a meaningful dent in the backlog of unsold assets that had built up since 2022 and constrained the ability of managers to make distributions to their LPs.
According to PwC, the private equity industry still held an estimated US$1 trillion of unrealized assets halfway through 2025. Bain & Co.’s analysis, meanwhile, highlighted that while current exit volumes were broadly in line with 2019 levels, buyout managers were holding twice as many assets in their portfolios now as they were then.
With limited cash returns coming back to them, LPs had limited wiggle room to make commitments to new funds.
Fundraising through the first three quarters of 2025 fell to US$569.5 billion, according to PEIfigures – the lowest fundraising total for a Q1-Q3 period in five years and around 22% down on the fundraising for the corresponding period in 2024.
GPs adapted to clogged exit channels by using alternative methods to unlock liquidity. At the beginning of 2025, Bain’s analysis showed that nearly one in every three portfolio companies in buyout portfolios (30%) had already undergone some form of liquidity event, ranging from minority stake sales and dividend recaps to NAV financings and continuation vehicle (CV) deals.
The continuation vehicle (CV) structure, in particular proved a popular option for expediting liquidity, with figures from Jefferies showing that CV deals accounted for almost a fifth (19%) of private equity exits through the first half of 2025.
The CV structure proved to be flexible through the course of the year, with GPs not only making us of single-asset CV liquidity at relatively attractive valuations (90% of single asset CVs priced above 90% of NAV, according to Jefferies) but also constructing multi-asset CVs to provide investors with much wider and deeper liquidity optionality.
The rise of non-institutional capital
The challenging fundraising market also served to strengthen the tailwinds behind the rise of private wealth investment into private equity.
The constraints in the institutional fundraising market obliged managers to broaden their investor base and innovate to unlock new pools of investors – most notably in the non-institutional space.
This drove a significant increase in the formation of evergreen fund structures (including interval funds and semi-liquid funds, among others), which were launched to facilitate more flows from private wealth into private equity strategies.
Analysis from HSBC Asset Management found that the net assets for the largest 16 private equity-focused evergreen funds registered with the US Securities and Exchange Commission (SEC) increased more than sixfold between 2021 and 2025, from US$10 billion to US$61 billion. The increase between 2024 and 2025 alone was 68%, reflecting the rapid growth of the non-institutional wealth channel through the year.
Retooling the private equity production line
For private equity managers, grasping the CV and private wealth opportunities not only necessitated a shift in investment and fundraising strategy, but also a significant operational overhaul.
As CVs and private wealth grew in 2025, managers encountered added layers of complexity in their operational model.
In the CV context, for example, asset pricing and reporting transparency, not to mention the capacity to support additional fund structures, demanded enhanced reporting and back-office capability. GPs also had to manage LP wariness of CV structures when they were in an incumbent investor position, particularly in multi-asset deals where portfolio companies included in the package were valued as a group rather than individually. Managers had to respond by producing granular pricing detail, as well as providing comprehensive reporting for the CV structures on their books.
GPs who dipped their toes into the non-institutional fundraising market, meanwhile, found that they had to ramp up their investor relations content output to reach a much broader, more disparate non-institutional investor base, often through distribution partners.
GPs also had to scale up back-office capability to service the preferred fund structures that non-institutional investors sought out when making allocations to private equity. New requirements included publishing monthly NAV figures and managing liquidity sleeves to ensure that vehicles could meet redemptions.
In addition, managers had to step up as LPs undertook detailed reviews of their fund exposures through the cycle of market dislocation – raising the bar on GP reporting.
From back office to front office, 2025 proved a challenging year for private equity firms − one that GPs nonetheless managed to navigate and adapt to.
Conclusion
Taken together, 2025 was a demanding but defining year for private equity. Managers contended with volatile markets, tighter operational and reporting requirements, and shifting investor dynamics, yet continued to broaden liquidity routes and refine their models to manage complexity. The year’s developments ultimately underscored the sector’s ability to adapt under sustained pressure.
Private Debt: 2025 Year in Review
Private Debt highlights from 2025
Private debt posted good returns for investors and enjoyed strong fundraising support in 2025.
Patchy M&A markets, however, limited deployment opportunities and increased competition for deals.
Private debt managers reduced margins and eased lending terms in the race to win financing mandates.
The formation of private credit continuation vehicles and private credit CLOs climbed in 2025, reflecting the asset class’s sophistication and maturity.
Jessica Mead
Global Head of Private Debt
A Year of Strength and Structural Change
Private debt delivered another strong year in 2025, buoyed by resilient performance, healthy investor demand, and the asset class continued appeal as a flexible source of capital. While macro volatility and tariff-related market dislocations influenced deployment conditions, private debt managers benefited from fundraising momentum and borrowers’ growing preference for speed, certainty, and tailored structuring.
At the same time, intensifying competition, evolving loan features, and new fund architectures signaled a sector continuing to mature and expand its role within private markets.
Performance, Fundraising, and Market Dynamics
Strong investor returns and steady fundraising support underpinned private debt’s solid performance in 2025. The asset class delivered exceptional risk-adjusted returns for LPs and continued its run of outperforming leveraged loan, high yield bond, and investment grade debt markets.
At a time when fundraising in other private-markets asset classes stalled and sputtered, fundraising for private debt in first nine months of 2025 reached US$252.7 billion – a record high for any Q1-Q3 period – as investors recognized private debt’s exceptional performance.
Competition Intensifies
Private debt’s unique selling points – speed and certainty of execution, no requirement for borrowers to obtain credit ratings, and flexible structuring – proved particularly relevant for borrowers in the first half of the year.
Tariff tumult saw public debt markets all but shutter in Q2 2025, with figures from White & Case and Debtwire recording a 16% fall in US and European syndicated loan and high yield bond issuance between the first and second quarters of 2025, opening the way for private debt players to fill the void.
Through the second half of the year, however, as the tariff fallout settled, syndicated loan markets reopened and rallied strongly to present stiff competition for private debt players in market still characterized by limited deal financing transaction flow.
According to Bloomberg, Wall Street banks had built up a pipeline of more than US$20 billion of M&A debt financing heading into the final quarter of 2025, winning mandates off private credit players by pricing debt at very low margins. Private credit players also faced pressure to defend existing loan books, as the low pricing offered by leveraged loan markets lured private credit borrowers with the opportunity to refinance debt at cheaper rates.
Private debt players had to respond by squeezing margins and upping leverage. Figures from Deloitte show that the margins on most private credit loan issuance dropped below five percent in 2025, while margins greater than six percent became a rarity. Leverage multiples increased during the same period, with around one in two new deals leveraged at more than 4x. There was a sharp spike in the volume of private credit deals levered at 5x or more.
Private debt funds also had to offer other bells and whistles to stand out from the crowd. Payment-in-kind (PIK) features, which allow borrowers to add interest payments to the principal balance of a loan rather than paying in cash, for example, became an increasingly common feature in private debt structures.
Research from investment bank Configure Partners showed that the inclusion of PIK features in terms when private debt loans were issued increased from 14.8 percent of loans in Q2 2025 to 22.2 percent in Q3 2025. The margins on these PIK facilities also compressed in 2025, as lenders narrowed pricing to win transactions.
Ratings agency Moody’s, meanwhile, noted that covenant-lite structures, historically only a feature of syndicated loan issuance, had become more common in the private credit space.
Dealing with Defaults
Private debt players also had to contend with growing concerns around default risk after the headline-grabbing defaults of auto-sector lender Tricolor and car parts supplier First Brands, where private credit lenders had exposure. Following the defaults, some industry executives expressed concerns that more hidden pockets of distress in private credit could emerge in the coming months, leading to potential losses for managers and investors.
Private credit was singled out for scrutiny following these defaults, even though BSL markets and banks carried exposure to the same borrowers, Indeed, private credit portfolios actually held up well in 2025, with KBRA DLD Default Research forecasting a direct lending default rate for 2025 of just 1.5 percent – lower than syndicated loan and high yield bond markets.
Nevertheless, covenant breaches did increase through the year, and even though breaches remained below longer-term averages, managers did have to invest more time and resources into managing portfolio credits in these situations.
A New Era of Operational Sophistication
In addition to building up their benches of workout and restructuring expertise, private debt players also had to upgrade their operating models as they followed private equity’s example and adopted new fund and distribution structures.
During the last year continuation vehicle (CV) structures became more prevalent in private credit, as private credit managers looked to extend hold periods for portfolio credits that hadn’t been able to exit to original timelines and required refinancings, term amendments and maturity extensions.
In workout situations extended hold periods were also required, although private credit funds also used CV deals to parcel up existing loan portfolios and sell to secondaries investors as a way to expedite payouts to existing investors.
The private credit market also saw an increase in the launch of private credit collateralized loan obligations (CLOs), which package up portfolios of private credit loans that are then securitized and sold off in tranches.
Bank of America forecast that the market was on track to deliver US$50 billion worth of private credit CLO formation by the end of 2025 – an all-time high. Executing private credit CLO deals required private debt managers to invest in additional accounting and legal expertise to manage the securitization process, structure special purpose vehicles to house portfolios, obtain ratings, and manage ongoing CLO administration.
Outsourcing partners stepped in to support private credit managers as they took on these higher back-office workloads and helped managers to focus on their core business of loan origination, underwriting and portfolio management in what proved to be an exciting but increasingly complex market.
Conclusion
Taken together, 2025 underscored private debt’s resilience and growing sophistication. Managers navigated a competitive environment marked by tighter margins, evolving borrower demands, and the increasing use of advanced fund and distribution structures.
Despite periods of market disruption, the asset class continued to attract capital and reinforce its role as a core component of private markets. As private credit strategies matured and operational expectations rose, the year demonstrated the sector’s ability to adapt, innovate, and maintain momentum in an increasingly complex landscape.
Real Estate: 2025 Year in Review
Real Estate Highlights from 2025
Despite tariff dislocation and geopolitical uncertainty, 2025 was a year of recovery and relative stability for real estate on the equity side.
Total real estate investment showed double-digit year-on-year gains in 2025, while real estate fundraising was set to beat 2024 totals.
Lower interest rates in the US and Europe brought down financing costs and debt markets were open for business.
The ongoing fall-out from the Chinese real estate crisis continued to linger and concerns about AI valuation bubble gave some cause for concern, but overall sentiment was positive the year drew to a close.
Maximilian Dambax
Global Head of Real Assets
Signs of Stabilization After Years of Volatility
Real estate entered 2025 on the back of prolonged macroeconomic and sector-specific pressures, including rising interest rates, weak bricks-and-mortar retail, and subdued office demand. Yet as the year progressed, falling financing costs, improving transaction activity, and pockets of resilience across logistics, data centers, and select regional markets signaled a broader reset.
While geopolitical uncertainty and tariff-driven volatility still weighed on sentiment, the asset class began to show clearer signs of stabilization compared with the disrupted post-pandemic period.
Market Recovery, Sector Divergence, and New Demands Drivers
After prolonged period of rising interest rates, declining bricks-and-mortar retail and falling office space demand post-pandemic, 2025 was a year of reset and recovery for real estate.
Despite market disruption in Q2 2025 following US tariff announcements, direct real estate investment activity rallied strongly in Q3 2025 to come in at US$213 billion for the quarter, boosting year-to-date transaction volumes by 21 percent on 2024 levels, according to JLL.
The STOXX Global 3000 Real Estate Index, meanwhile, was showing gains of close to 10 percent towards the end of 2025, as real estate real estate valuations stabilized following an extended run of market volatility and pricing uncertainty.
Steadier Outlook Support Fundraising
The improving backdrop for real estate investment was good news for private real estate fundraising, which fell to a five-year low in in 2024, but rallied through the course of 2025.
PERE figures showed real estate fundraising coming in at US$164.39 billion for the first nine months of 2025, a 24.1 percent year-on-year increase on the same period in 2024, and already close to matching the full year total of $167.39 billion for 2024. In another signal pointing to a fundraising recovery, the proportion of funds closing below target fell from 62 percent in 2024 to 49 percent through the first nine months of 2025.
Headwinds Still to Navigate
Annual fundraising for 2025, however, did not match the US$299.38 billion raised at the peak of the market in 2021, and global real estate assets under management remained on a downward slope, dropping to US$3.8 trillion according to the latest figures compiled by real estate industry associations ANREV, INREV, and NCREIF.
Green shoots did emerge, but the industry still had a way to go to claw back lost ground.
Real estate balance sheets were still stretched as a result of falling asset values and higher interest rates through the market downcycle. Refinancing debt remained challenging, and while lenders did afforded real estate borrowers breathing room by extending terms, a US$936 billion wall of commercial real estate debt is due to mature in 2026, according to S&P Global Market Intelligence, loomed over the industry
Real Estate investors also had to grapple with the ongoing fallout from the ongoing downturn in the Chinese real estate space, one of the biggest real estate markets in the world and a cornerstone of the Chinese economy, ran into its fourth year.
Despite various stimulus measures to support the Chinese market, real estate valuations didn’t improve, and large-scale developers have faced large losses and financial distress. The fallout rippled out, impacting other Asian property markets – and beyond.
Real estate investors also kept a close eye developments in the AI sector, the spur for investment in data center assets and one of the strongest real estate fundraising categories in 2025.
Rising concerns around the risk of an AI valuation bubble, however, surfaced in the final quarter of the year, leading to share price volatility in stocks with AI exposure.
Technology share prices stabilized following strong earnings reports and positive revenue forecasts from key players in the AI ecosystem, but real estate managers did take pause to spend more time sense-checking data center and AI investment cases.
Upward Trajectory
For all the complexities and challenges that managers encountered in 2025, interest rate cuts by central banks in the US, UK and Europe were a much-welcomed macro-economic development, and brought down debt servicing costs for real estate assets. This helped real estate dealmakers to refinance debt and push out maturity walls, as well as facilitate a clearer picture on asset valuations.
Indeed, closer alignment on pricing was observed in 2025 and positively impacted the market, with analysis from Savills analysis showing an increase in average real estate transaction sizes in 2025. According to Savills there was a 14 percent increase in the number of individual properties trading for more than US$100 million, and a 17 percent uptick in the value of portfolio and entity level deals. Big cheque sizes suggest increasing confidence on the part of buyers.
Fundraising trends, meanwhile, also indicated that private real estate managers were finding assets at attractive entry valuations, and add value to properties sentiment improved.
Opportunistic real estate investment strategies, which present the highest return potential but require significant upfront redevelopment and construction investment in underperforming assets, accounted for 40 percent of the real estate capital raised across the first nine months of 2025, according to PERE. This highlighted the opportunity to invest in assets that had been passed over in recent years because of market volatility.
Real estate investors also began to feel the benefits a favorable supply-demand imbalance (particularly in segments such as office real estate) that became a feature of the market as new developments went on hold due to market uncertainty and elevate financing costs in prior years.
In the office segment, for example, new groundbreakings had fallen to a record low in the US and Europe, according to JLL, and most new property pipelines had been pre-leased. As a result, global office leasing climbed to it is best level since 2019. Global office vacancy rates dropped, and prime sites were at a premium, supporting leasing growth.
Other real estate categories also looking in good shape, albeit with some regional differences.
In logistics real estate, for example, leasing improved in North America and Europe in Q3 2025, although Asia markets were more cautious on the back of tariff and export uncertainty, although logistics presented opportunity for savvy buyers who were able adapt to changes in trade policy. Retail was another bright spot, with store openings outpacing store closures in the US, according to JLL, while in Europe and high growth Asian economies premium sites were in high demand with space limited.
Real estate has had rough ride through the last 36 months, but as interest rates come down and valuations recover, 2025 marked a year where the asset class finally has a chance to turn the corner.
Conclusion
Despite persistent challenges—from the ongoing fallout in China’s property sector to volatility in office markets—2025 marked a turning point for global real estate. Falling interest rates, firmer transaction activity, and renewed investor appetite helped stabilize valuations and support a gradual recovery in fundraising.
Strength in logistics, data centers, and select regional markets further underscored the sector’s adaptability in the face of macro and structural headwinds. While not all segments rebounded equally, the broad improvement across pricing, liquidity, and sentiment suggested that real estate finally began to regain its footing after several difficult years.
Infrastructure: 2025 Year in Review
Infrastructure Highlights from 2025
Private infrastructure posted excellent fundraising numbers in 2025 as managers reaped the rewards for delivering solid returns.
Investment cases benefitted from favorable long-term growth drivers, with digital infrastructure and power driving deal flow.
Areas of complexity emerged in the renewables sub-sector, where the US and European markets diverged.
Infrastructure secondaries and infrastructure debt provided infrastructure GPs and LPs with welcome pools of liquidity.
Maximilian Dambax
Global Head of Real Assets
Growth Anchored by Fundamentals
Infrastructure continued to demonstrate resilience in 2025, supported by strong fundraising momentum, robust long-term demand drivers, and solid underlying fundamentals across core and emerging sub-sectors.
While market volatility, policy shifts, and technology-led disruption influenced activity, investors remained focused on the asset class’s capacity to deliver stable returns and capital deployment opportunities. These dynamics shaped a year marked by both sustained growth and evolving complexity across the global infrastructure landscape.
Market Performance, Capital Flows, and Sector Dynamics
The positive long-term outlook for infrastructure investment growth and a good run of returns boosted private infrastructure fundraising in 2025.
By the end of Q3 2025 private infrastructure fundraising had already achieved a record annual high, as fundraising for the first nine months of 2025 reached US$200 billion – the first time the asset class had crested the US$200 billion mark ever, according to Infrastructure Investor data.
The share of private infrastructure funds closing on target, meanwhile, climbed more than three-fold, from nine percent in 2024 to 31 percent in 2025. Funds also took less time to reach a close, with average time on the road down by more than six months when compared to the previous year.
The strong 2025 fundraising numbers reflected private infrastructure’s consistent returns performance. Analysis of the MSCI Private Infrastructure Asset Index by commercial real estate services and investment business CBRE showed private infrastructure posting 11.5 percent rolling one-year total returns – outperforming listed infrastructure and global bonds over a three- and five-year investment horizon.
The industry’s returns performance was grounded in solid underlying fundamentals, with the requirement for investment in water and sanitation, electricity and power, and transport and logistics capacity increasing as global populations grow.
These fundamentals supported positive growth in global private infrastructure investment, with CBRE analysis of Infralogic data showing a 22% year-on-year gain through the first nine months of 2025, with investment reaching US$960 million for the period.
Shifting Ground
One of the single-most important drivers of infrastructure’s overall performance and deal flow in 2025 was the data center market, where huge investment in AI spurred robust demand for digital infrastructure.
McKinsey forecast in the summer that capital expenditure on data center infrastructure could reach as much US$1.7 trillion by 2030 – predominantly driven by AI expansion.
The positive momentum from the data center boom rippled out into other infrastructure sub-sectors, most notably power. Electricity consumptive data centers drove up power demand and pricing, with McKinsey models projecting that data power center would require1,400 terawatt-hours of power by 2030, representing four percent of total global power demand.
There were, however, some bumps in the road for the AI growth story during the year. In August a research report compiled by the Massachusetts Institute of Technology (MIT) found that 95 percent of organizations were deriving zero return from investments in AI, raising concerns of an AI bubble. Market anxiety around the sustainability of AI spending peaked again in November, leading to share price drops across the board for large technology companies.
Positive earnings from chipmaker Nvidia – a key bellwether for the sector – eased AI bubble concerns, but the year closed with infrastructure stakeholders taking a more measured approach on AI and data center growth projections.
Renewables Reset
Renewable energy was another infrastructure sub-sector that encountered volatility and complexity in 2025.
In July the US passed legislation to phase out tax credits for wind and solar projects by 2027, rather than the original 2032 deadline. This left developers facing truncated project timelines and under pressure to accelerate project developments, or risk losing tax credit benefits.
The phase out of tax credits followed an earlier executive order from the White House temporarily withdrawing offshore leasing for wind power, as well as the Securities and Exchange Commission (SEC) dropping its defense against state-led lawsuits challenging its climate-related disclosure rule.
The shifts in the US led to divergence from the European position, where the EU retained the key pillars of its environmental legal framework, including the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD), although the EU did bring forward proposals to ease the compliance burden of these directives for small and medium-sized enterprises.
The European Central Bank (ECB), meanwhile, continued to integrate climate risk into its operations, and the European Investment Bank (EIB) signed off on €15 billion of green transition funding.
This left infrastructure managers with US and European LP bases and operations having to walk a fine line between the ESG and climate priorities of US and European regulators and investors.
Nevertheless, renewables still represented the single biggest category for infrastructure fundraising in 2025, with the US$20 billion raised for Brookfield’s Global Transition Fund II – which will focus on investment in the transition to clean energy – the third biggest infrastructure fund close in the first nine months of 2025. Brookfield cited an “any and all” approach to ramping up power capacity as a key driver of low carbon energy production, with clean energy an essential component to meet growing demand for power, not just from data centers, but also from the electrification of transport and industry.
Political instability may have shaken up the investment case for investment in decarbonization and renewable energy infrastructure, but investors continued to see long term value in the industry.
Sophisticated Structuring to the Fore
Infrastructure also saw momentum build in areas such as infrastructure secondaries and infrastructure debt, which injected additional liquidity and flexibility into the asset class.
According to private markets investment adviser Stafford Capital Partners infrastructure secondaries deal volume was on track to climb by around 50 percent in 2025 and reach approximately US$15 billion for LP-led deals, and between US$15 billion and US$20 billion for GP-led transactions.
The increase was spurred by a combination of the liquidity requirements of private markets programs and the use of secondaries markets to manage exposure to regulatory change and geopolitical uncertainty.
Infrastructure debt provided a similarly useful pool of liquidity to complement infrastructure M&A and project development, as well as offering investors an opportunity to diversify their fixed income portfolios and lock in consistent yields uncorrelated to public markets.
Infrastructure debt assets under management (AUM) grew at a compound annual growth rate (CAGR) of 23.1 percent, according to Institutional Investor, and positioned infrastructure debt as an increasingly sizeable and influential constituent of the infrastructure funding mix.
The growth of these adjacent pools of capital in the infrastructure ecosystem provided valuable support to infrastructure dealmakers, who sought out partners to provide liquidity and share risk.
Conclusion
Overall, 2025 reinforced infrastructure’s position as a resilient and strategically important private markets asset class. Strong fundraising, dependable performance, and accelerating demand in areas such as digital infrastructure supported continued growth, even as policy shifts and renewables volatility added layers of complexity for managers and investors.
The expanding role of infrastructure debt and secondaries, combined with divergent regulatory developments across the US and Europe, further shaped capital flows and operating conditions. Despite these challenges, long-term fundamentals remained intact, underscoring infrastructure’s ability to adapt and attract capital in a rapidly evolving environment.
How Alter Domus’ Integrated Digital Ecosystem Powers Every Stage of Private-Equity Fund Administration
Discover how Alter Domus’ integrated digital ecosystem streamlines fund administration end-to-end—delivering real-time visibility, automated workflows, unified reporting, and audit-ready accuracy across every operational layer.
Private-equity firms don’t lose time because they lack expertise; they lose time due to internal fragmentation and disconnected processes their fund administration partners. When data sits in separate systems, reconciliation becomes routine, and insight comes too late. Investors ask for real-time visibility; regulators, investors, and internal stakeholders demand audit trails; CFOs and COOs must deliver both.
At Alter Domus, our goal is to help clients operate with absolute confidence in their data and processes – enabling faster decisions, stronger investor trust, and greater operational efficiency. We do this by connecting every stage of fund administration into one coherent digital ecosystem streamlining every process. Our integrated architecture unites accounting, workflow automation, reporting, and investor-facing platforms in a single, auditable framework.
Clients benefit from a continuous, validated data flow that enhances accuracy, accelerates reporting, and builds confidence across every stakeholder —from fund controllers to limited partners.
Data Integrity That Powers Decision-Making
Accurate decisions start with clean data. Alter Domus integrates accounting and investor data directly into its architecture, validating each transaction and synchronizing ledgers in real time across entities, currencies, and GAAP standards. CFOs gain instant visibility into true positions and can sign off with confidence.
Clients benefit from complete, audit-ready accuracy that removes reconciliation overhead and transforms financial control into strategic agility.
Technical detail and benefits:
Real-time ledger validation—detects anomalies before period close, cutting manual corrections.
Automated multi-GAAP consolidation – delivers consistent reporting across global structures.
Unified reporting schema—links fund, SPV, and investor data to support combined reporting, improving clarity and reducing manual compilation work.
ILPA-aligned reporting outputs—supports industry-standard formats for smoother submissions and auditor collaboration.
Intelligent Workflows That Reduce Risk
Every delay, email, or version error adds cost and risk. Alter Domus’ Workflow Platform replaces fragmented task management with rule-based automation that standardizes every recurring process—capital calls, distributions, investor transfers, fund-of-fund commitments, and period-end reporting.
Clients benefit from predictable, transparent processes and the ability to trace ownership and progress in real time. Workflows cut turnaround times, improve accuracy, and support continuous auditability across global teams.
Technical detail and benefits:
Configurable workflow logic with automated routing—ensures approvals follow defined rules and reduces exceptions.
Timestamped audit trails and SLA dashboards—provide measurable accountability for internal and outsourced teams.
Automated data hand-offs—remove manual entry and reduce operational risk.
Integrated document approval layer—captures rationale and sign-off history for regulators and auditors.
Unified Client Experience Through CorPro
Operational transparency is no longer optional. The CorPro Portal, Alter Domus’ proprietary client and investor portal unites workflow visibility, reporting, and investor communications within one secure environment. Dashboards show live KPIs and workflow status; the Investor Relations Hub centralizes notices and correspondence; and the Document Library stores version-controlled reports with multi-factor authentication.
Clients benefit from a single, branded digital interface that replaces fragmented communication with real-time collaboration and secure document sharing—improving responsiveness and consistency across every relationship.
Role-based access controls—protect sensitive investor and transaction data.
Embedded API links to accounting and reporting engines—keeps dashboards live and eliminates lag.
Centralized notification system—alerts teams to new deliverables or pending approvals instantly.
Reporting You Can Trust – ReportPro
Reporting is where operational excellence meets investor scrutiny. ReportPro, Alter Domus’ proprietary web-based reporting application, automates every step of the production cycle—drafting, validation, review, and release—directly from the accounting layer. Financial statements, capital account statements, and distribution notices are built with auto-footing, version tracking, and PDF-compare tools, allowing managers and auditors to collaborate securely in one space.
Clients benefit from faster cycles, zero-version confusion, and full traceability from source data to investor-ready report.
Technical detail and benefits:
Auto-footing and validation rules—remove manual spreadsheet checks.
Two-factor authentication and user-based rights—secure sensitive documents during review.
PDF-compare and version logs—provide instant visibility of changes for audit comfort.
Direct posting to CorPro—ensures investors receive approved documents immediately and securely.
Waterfall Governance, GP Carry, and Forecasting
Waterfall and carry calculations are too critical and too complex to rely on spreadsheets. Alter Domus’ dedicated waterfall and carry governance engine provides structured, auditable logic that ensures accuracy and consistency across funds and vintages.
Technical detail and benefits:
Automated waterfall calculations — reduce model risk, all data stored on-system.
Scenario analysis and forecasting — supports forward-looking portfolio planning
Centralized rule library — ensures consistent application across all funds.
Treasury Operations and Liquidity Management
Treasury functions must be both precise and nimble. Through your Treasury Management System, Alter Domus enables secure, controlled cash-movement workflows that integrate with a range of third-party systems, including accounting and reporting platforms.
Technical detail and benefits:
Centralized access to bank accounts across multiple banking relationships within a single, secure platform login.
Consolidated cash-movement reporting—enhances transparency for CFOs and auditors
The Power of an Integrated Digital Ecosystem
Our technology stack is not a collection of tools — it is a connected ecosystem. By linking accounting, workflow automation, investor communications, reporting engines, treasury management, and waterfall governance into one architecture, Alter Domus transforms historically manual processes into an efficient, end-to-end digital operating model.
Clients gain:
Real-time visibility
Fewer handoffs
Faster reporting cycles
Audit-ready transparency
A consistent experience across every touchpoint
This is operational equity — powered by purpose-built technology and delivered through deep private-markets expertise.
Transparent, Digital Investor Experience
Investors demand immediacy, clarity, and trust. Alter Domus’ CorPro Investor Portal delivers a modern interface that mirrors the GP’s internal data. LPs access dashboards showing NAV, commitments, and distributions; the Document Centre for historical statements; Onboarding modules for KYC/AML, and a Marketing Data Room for diligence materials.
Clients benefit from a professional, self-service investor experience that reduces queries, accelerates fundraising, and strengthens relationships.
Technical detail and benefits:
Real-time dashboards—give LPs instant insight into fund performance and cash flows.
Automated content alerts—notify investors when new reports are posted, increasing engagement.
Secure document storage and encryption—safeguards confidential LP information.
Integrated onboarding workflow—simplifies compliance checks and investor onboarding cycles.
Continuous Data Flow. Continuous Confidence.
Alter Domus’ architecture maintains end-to-end data lineage— with every data point traceable from transaction entry to investor report. APIs synchronize each module, ensuring continuous updates and analytics across accounting, workflow, reporting, and investor layers. The system scales effortlessly across outsourcing, co-sourcing, or lift-out models.
Clients benefit from consistent governance, reduced reconciliation cost, and a digital backbone ready for advanced analytics, ESG integration, and AI-driven insights.
Technical detail and benefits:
Bi-directional APIs—enable live synchronization with client environments.
Configurable data warehouse—supports advanced analytics without disrupting core systems.
Metadata lineage tracking—ensures every report references validated, traceable data.
Multi-jurisdiction framework—maintains consistency for global structures under varied regulatory regimes.
Turning Operational Precision into Performance
Alter Domus converts integration into impact. CFOs gain real-time control over fund financials and faster audit clearance. COOs run standardized, compliant operations that scale globally without losing visibility. Investor-relations teams deliver data and documents instantly, enhancing engagement. LPs receive timely, reliable information—strengthening trust and reducing due diligence cycles.
Clients benefit from a unified operating model that reduces risk, accelerates growth, and creates measurable operational alpha. Powered by more than 2,000 dedicated private equity professionals, we reinforce each operational process with deep expertise, strengthened further by advanced technology.
By blending industry-standard accounting engines with proprietary automation and digital portals, Alter Domus gives private equity managers a platform built not just for administration, but for advantage.
Bridging the ABOR/IBOR Gap:
What Endowments and Foundations Operations Leaders Really Need
Discover how aligning the Accounting Book of Record (ABOR) and the Investment Book of Record (IBOR) can give endowments and foundations real-time clarity across public and private markets. Learn why this shift is key to reducing risk and improving decision-making.
The Reality for Endowment Operations Team
Managing investment operations in an endowment or foundation is a delicate balancing act. Teams are often small, yet they oversee increasingly complex portfolios that now include alternatives alongside public markets, leading to a surge in data, valuation methods, and reporting requirements.
The pressure is relentless. Investment offices and committees demand daily insights into exposures, liquidity, and a multitude of associated information, while boards and donors expect transparency. Auditors require precise reconciliations, all of which must be delivered timely despite the various formats of data received from multiple custodians and investment managers.
For investment operations teams, the challenge lies in managing enterprise-scale complexity often without the required bandwidth. It’s essential to focus on what operations teams need to succeed.
What Ops Leaders Need
Alignment between Accounting Book of Record (ABOR) and Investment Book of Record (IBOR)
No more misalignment between the “official” accounting book and the “working” investment book. The two must reconcile seamlessly, so finance and investment teams are speaking the same language.
Daily, Decision-Ready Data
Ops teams need more than quarterly closes or batch-driven reports. They need accurate daily visibility into exposures, liquidity, cash flows, and commitments — so the investment office can act with confidence in real time.
Forward-looking Transparency
Accounting records are essential, but investment operations must also anticipate what’s ahead: capital calls, distributions, unfunded commitments, and liquidity pinch points. This forward view is what enables true risk management.
Customizable Reporting
Boards, donors, auditors, and regulators all want information in different formats, often on short notice. Ops leaders need reporting that adapts to the audience, not rigid templates that force endless manual work.
A Partner that Understands Alternatives
Endowments and foundations manage complex, multi-asset portfolios where alternatives are only one piece of the equation. True partnership means understanding how private market investments fit within the broader ecosystem of public equities, fixed income, and real assets—and ensuring they’re all captured in a single, coherent reporting framework.
At Alter Domus, our strength lies not just in our alternative expertise but in how we integrate that knowledge across the full spectrum of holdings. We help investment teams achieve true total-portfolio visibility—connecting data from private funds, co-investments, and partnerships to the liquid exposures managed elsewhere.
The result is unified, institutional-grade reporting and governance that reflects the full reality of your portfolio. That integrated approach extends to how we collaborate with your existing partners.
Seamless Collaboration with Custodian Banks
We work closely with custodian banks to ensure that data and reporting flow smoothly across both public and private assets. Our systems and workflows are designed to complement custody platforms—enhancing, not duplicating, their capabilities.
For investment teams, this means maintaining established banking relationships while gaining a more complete and connected picture of portfolio performance. The result is a cooperative model that brings together the strengths of both worlds: the custodians’ scale and security with Alter Domus’ deep understanding of private markets.
The Challenge with Non-specialist Solutions
Many of the partners that serve endowments and foundations operate a model that was designed for traditional markets, excelling in equities and bonds but struggling with alternatives. Data silos hinder operations teams from achieving a unified portfolio view, and standardized reporting falls short of delivering the daily insights investment offices need.
Non-specialist solutions often overlook the complexities of private equity, private credit, hedge funds, and real assets. Capital calls, unfunded commitments, and bespoke valuations don’t fit into public market workflows, forcing teams to manually reconcile gaps and adapt templates for boards and auditors. For small endowment teams, these challenges lead to increased workload, risk, and confusion—contrary to the goals of ABOR and IBOR.
Aligning for Clarity and Control
For directors of investment operations, the challenge isn’t just more data — it’s delivering accuracy, timeliness, and transparency with small teams under mounting pressure.
That requires a model where ABOR and IBOR are aligned, reconciled, alternative-aware, and tailored to your governance needs.
When to migrate a private equity fund and how to do it
Alter Domus has supported a wide range of private equity fund migrations globally, building up a deep bank of internal expertise and track record that private equity managers can rely on when changing administrators.
In this guide Alter Domus shares its insights into why private equity firms are migrating funds in greater numbers and the technology and operational capabilities private equity firms are looking for when changing administrator.
October 2, 2025
The operating context for the private equity manager has completely transformed during the last decade and many firms are preparing to migrate their funds as a result.
Buyout firms are now managing US$4.7 trillion of assets and holding almost twice as many portfolio companies in their funds than in 2019, according toBain & Company figures.
With the buyout industry operating on a completely different scale than 10 years, the demands on the buyout back office have inevitably intensified. This not just because GPs are now responsible for shepherding a larger number of funds, shepherding bigger portfolios, and executing a higher volume of deals. Managers also have to comply with higher investor and advisor demands when it comes to the granularity and timeliness reporting.
The evolution of deal structures, which now include co-investments and continuation vehicle transactions, have placed further workloads on private equity operations, as have the increasing use of fund finance and the growth of the non-institutional investor base.
Time for a change: when to migrate funds
The increasing complexity and sophistication of the private equity business means that buyout managers are now facing an operational inflection point, where the relatively simple operating infrastructure that has served the industry so well for so long now requires an upgrade.
Similarly, long-standing outsourcing partnerships, where outsourcers were only required to provide quarterly fund reports, could now also require a refresh.
It is in this context that a series of trigger points are emerging for buyout managers to take the leap and migrate funds. This is not a decision to be taken lightly – fund migrations are complex, demanding projects that can be at risk of costing more and taking longer than anticipated – but many private firms are now approaching a point where delaying a migration can’t be put off any longer.
Why managers migrate funds
Poor service: As the demands on outsourcing partnerships have increased, there are more reports of private equity firms citing poor service delivery as a catalyst for migration. Fund administrators still running on legacy systems, using inflexible reporting templates and relying on manual processes have been unable to keep up with the reporting timelines and detail that private equity firms and their investors now expect. This in turn can lead to errors and delays. Managers will expedite migrations when incumbents can’t keep pace with evolving GP requirements, switching to administrators that have the tools and scale to stay ahead of increasing regulatory and reporting workloads.
Provision of scale: Deteriorating service levels can often be boiled down to a question of scale. Private equity managers have seen huge increases in assets under management (AUM) and in many cases simply outgrow the capacity of incumbent providers and have to move on to providers that have the bandwidth to grow with a manager over time and handle rising transaction volumes and a wider array of fund structures.
Keeping costs down: Private equity managers are facing the most challenging fundraising market since the 2008 financial crisis, with private equity fundraising down 17% year-on-year in H1 2025, according to PEIfigures. It has been essential, then, for private equity firms to run fund operations as efficiently and cost-effectively as possible and delivering value for money for LPs. Indeed, a Preqin survey found that well over a quarter of managers (29%) see pricing and fee transparency as a key catalyst for changing fund administration provider.
Up-tiering technology: The requirement to upgrade technology stacks and transition onto best-of-breed industry software packages will be a driver of fund migration for private equity managers, who are increasingly relying on fund administration partners to not only act as a provider of outsourced fund reporting services, but also a first point of contact for advice on the choice and implementation of technology. Preqin’s survey found that close to a fifth of managers change fund administrator because of technology.
How to choose a new fund administrator
The reasons that trigger a fund migration will also shape what a private equity manager wants from a new fund administration provider.
The ask will vary from manager to manager, depending on investor base, current gaps in in back-office operations, technology requirements and geographic footprint.
There are nevertheless a set of core themes that will inform fund administration selection in most cases:
Asset class expertise: Experience and track record in private equity matter. GPs will expect their fund administrator to have deep private equity expertise. Geographic reach is also important. GPs want fund administrators to be close to the specific LP communication, reporting and fund structure preferences in all key global markets, and to have teams on the ground where investors are active.
Exceptional technology and data capability: Technology is viewed as the single most valuable lever for making private equity back-offices more efficient and for meeting increasing investor demands. The sophisticated investors will have a firm working knowledge of the asset-specific software programs, including Allvue, eFront, Private Capital Suite (formerly Investran) and Yardi, and able to advise on the technology stacks suited to each client’s bespoke requirements. Managers also expect fund administrators to facilitate seamless integration and interoperability between the private equity firm’s core back-office infrastructure and third-party data providers. Fund administrators should also be able to implement cloud-native operating models, have an eye on the developments around self-service data for clients, and meet the highest cyber security standards and certifications.
Operational model flexibility: A change of fund administrator also opens an opportunity for private equity GPs to review operating models, and to transition to an operating model that best serves long-term growth ambitions and technical requirements. GPs will favor fund administrators that can provide operational flexibility, whether that be through a classic outsourcing arrangement, a co-sourcing model or a lift out.
Comprehensive regulatory knowledge: Keeping track of myriad regulatory developments across multiple jurisdictions has become increasingly challenging for private equity to sustain without support, especially for US managers operating in Europe and/or the United Kingdom. Managers are relying on fund administrators to be up to date on all key regulatory developments, range from the Alternative Investment Fund Managers Directive II (AIFMD II), Common Reporting Standard (CRS) and Foreign Account Tax Compliance Act (FATCA) to the Sustainable Finance Disclosure Regulation (SFDR), The General Data Protection Regulation (GDPR). Automated regulatory reporting and compliance is also becoming a more common ask, as managers look for ways to lighten the regulatory compliance burden.
Service excellence: Responsiveness and service excellence are a must for all GPs, who are now drafting detailed service level agreements (SLAs) with trackable key performance indicators (KPIs) around processing times and reporting accuracy. The best administrators will understand each client’s context and proactive when it comes to addressing client requirements.
A long-term partnership
When undertaking a fund migration, a private equity manager will want the relationship with a new fund administrator to be a long-term one. It is not in GP or LP interests to be constantly having to migrate funds.
As a fund administrator operating at scale Alter Domus has the resources and private equity-specific expertise to grow with clients, maintain excellent service levels and keep client platforms updated with the latest technological tools. We employ 6,000 professionals across 23 jurisdictions and administer US$3.5 trillion of assets and 36,000 client structures.
We have the scale, technology and industry knowledge to not only facilitate smooth fund migrations that cover the shifting requirements of the modern private equity manager but also put platforms and relationships in place that last for the long-term.
Discover how strengthening agency services helps private credit manager enhance transparency, mitigate risk, and ensure operational resilience across complex loan structures.
A Quiet Function with Outsized Impact
In private markets, operational infrastructure often sits in the background — until it fails. Among the most critical, and most overlooked, is the Agency. Far from a clerical role, the agent is the contractual backbone of loan agreements: keeping registers accurate, payments flowing, compliance monitored, and communications clear. Done well, the role is invisible; done poorly, it can cause disputes, delays, and reputational harm that ripple across every stakeholder.
Private Credit: Growth Brings Complexity
Private credit has grown into a core pillar of global finance. The U.S. Federal Reserve estimates the U.S. private credit market at USD 1.34 trillion as of mid-2024, with global totals nearing USD 2 trillion. J.P. Morgan notes it has expanded at roughly 14.5% annually over the past decade, making it one of the fastest-growing corners of alternatives.
This expansion has brought greater complexity. Facilities are now larger, more syndicated, multi-tranche, and frequently cross-border. With this scale, the margin for operational error narrows, and the Agency has become a strategic safeguard for transparency and trust.
The Shifting Demands of Private Markets
Ten years ago, private credit often meant bilateral loans or small club deals. Today, managers are navigating multi-currency, multi-jurisdictional facilities with heavy reporting obligations.
At the same time:
Investors and regulators expect more: Transparency and timely data are now baseline requirements.
Amendments and restructurings are common: Higher interest rates are testing borrowers, making flexibility and governance critical.
Operational resilience is scrutinized: Lenders demand confidence that data, payments, and records are accurate at all times.
The Agency has evolved from administrator to stabilizing force at the center of increasingly complex credit markets.
Getting Agency Services Right
To mitigate risks, managers must view the Agency not as a back-office utility but as a critical partner. The following areas are essential:
1. Independence and Impartiality
An Agency must act for all lenders equally, without bias. Independence ensures trust, especially during contentious votes or restructurings.
2. Accuracy as the Foundation
From payment flows to lender registers, precision is everything. The agent’s records are often the “source of truth” in disputes; they must be beyond reproach.
3. Proactive Compliance and Monitoring
Covenant oversight, reporting obligations, and regulatory checks cannot be reactive. A strong agent anticipates deadlines, flags risks early, and provides confidence that nothing is missed.
4. Event−Ready Expertise
Defaults, amendments, and restructurings are inevitable in today’s markets. The true test of an agent is how they perform under stress: fast, organized, and with continuity for all parties.
5. Technology−Enabled Transparency
In an era where stakeholders expect real-time access to information, portals and digital tools are essential. They transform the agent from a bottleneck into an enabler of transparency.
6. Scale with a Human Touch
Global coverage, certified processes, and scalable platforms matter — but so too does responsiveness. Managers should seek agents who combine infrastructure with service.
What Happens When Agency Fails
The risks of weak agency support are rarely visible until they become unavoidable. Consider the following scenarios:
Inaccurate registers leading to disputes over who holds voting rights during an amendment.
Delayed notices causing lenders to miss funding deadlines, damaging borrower relationships.
Weak default handling resulting in inconsistent lender communication and prolonged restructurings.
Regulatory missteps such as missed tax reporting or inadequate sanctions screening, creating compliance exposure.
Each of these outcomes not only disrupts individual deals but also undermines confidence in a manager’s operating platform. In a market where credibility is paramount, the stakes are high.
From Administrator to Strategic Partner
The best Agents are those whose presence is barely felt — not because their role is minor, but because they execute it flawlessly. In the fast-evolving world of private markets, where complexity and scrutiny are rising, the importance of getting agency services right cannot be overstated.
For managers, the choice of an Agent is not a back-office detail. It is a strategic decision that underpins trust with lenders, protects reputations, and ensures that operational resilience matches investment ambition.
Future-Proofing Governance: Building Operational Strength for Endowments and Foundations
Discover how future-proof governance can transform your endowment’s operations into a strategic advantage. See why strong oversight, scalable systems, and expert partnerships are essential for sustainable growth.
For directors of investment operations, governance is the foundation of effective portfolio management, accurate data, and risk control. In today’s landscape of rising regulatory demands and complex alternatives, strong governance is also a strategic asset.
Future-proof governance enables teams to move beyond reactive measures, creating resilient systems that enhance accuracy and credibility. This shift allows teams to focus on high-value tasks that drive portfolio success.
Raising Standards with confidence
Operational teams must deliver timely, precise data to boards, auditors, and regulators, facing higher expectations for transparency and risk oversight. For leaders, this is an opportunity to demonstrate that governance is a competitive advantage.
Robust processes foster confidence, reduce rework, and empower investment committees with better decision-making tools. At Alter Domus, we see organizations that strengthen governance not only meet current demands but also confidently explore new strategies and investment opportunities.
What Future-Ready Governance looks like in Practice
Future-proof governance is about strengthening operational infrastructure. For investment operations leaders, it means:
Resilient systems that maintain accuracy and continuity through staff turnover or market disruption.
Scalable processes that can handle the growing demands of alternatives – managing capital calls, monitoring liquidity, and tracking performance, etc – without adding headcount
Integrated reporting that provides a single version of the truth for boards, auditors, and investment committees.
Independent oversight that validates calculations, reduces operational risk, and enhances credibility with stakeholders.
With these pillars in place, governance supports efficiency and insight rather than slowing things down.
Outsourcing as a governance accelerator
Many endowments and foundations operate with lean teams, making it challenging to invest in the infrastructure required for governance at scale. Outsourcing fund administration provides a solution by reinforcing internal teams rather than replacing them. A strong partner like Alter Domus delivers:
Independent NAV and reconciliations, creating objectivity and reducing the risk of error.
Best-practice processes, refined across hundreds of institutional clients and seamlessly integrated into the operating model.
Technology-enabled transparency, giving operations leaders instant access to dashboards and reports without heavy internal investment.
Capacity relief, allowing teams to redirect time and talent toward strategic projects rather than manual processing.
In this way, outsourcing becomes a governance accelerator, embedding institutional-quality controls and reporting into organizations with leaner resources.
Tangible benefits for operations teams
When governance is strengthened through the right systems and partners, operations leaders see immediate, positive impacts. Audits proceed with greater speed and efficiency, requiring fewer adjustments and minimizing back-and-forth communication. This streamlining allows teams to concentrate on strategic initiatives rather than administrative burdens.
Board and committee reports become timelier and more insightful, establishing operations as a trusted source of decision-ready intelligence. This evolution enhances the quality of discussions and decisions at the highest levels.
Risk oversight improves, enabling proactive monitoring of exposures, cash flows, and liquidity across complex portfolios, fostering a culture of preparedness. As operational credibility increases so does trust from boards, donors, and external stakeholders. This strengthened relationship, built on transparency and reliability, lays a solid foundation for future collaboration and success, positioning organizations for sustainable growth.
Governance as an enabler of operational excellence
For directors of investment operations, future-proof governance means building a robust infrastructure that navigates today’s complexities while adapting to tomorrow’s demands. It minimizes risk, boosts efficiency, and empowers teams beyond back-office functions.
At Alter Domus, we specialize in helping endowments and foundations achieve this balance. By merging deep expertise in alternatives with advanced technology and independent oversight, we transform governance into a strategic asset. The outcome is a reliable data environment, clear reporting, and investment staff focused on strategy rather than reconciliations. In this context, governance becomes an enabler of operational excellence, key to sustaining efficiency and trust for the future.
Exchange-traded funds (ETFs) composed of collateralized loan obligations (CLOs) have grown significantly in recent years. The underlying CLOs consist primarily of senior secured broadly syndicated loans (BSLs). Although retail investors have had access to BSL funds for over 30 years through open-ended leverage loan mutual funds and for over a dozen years through ETFs, the first publicly traded CLO ETF was launched only in 2020. Prior to this development, CLO investments were predominantly made by institutional investors. This is particularly noteworthy given that historically anywhere from a half to up to two-thirds or more of the US BSL market are held by CLOs[1].
This paper examines the performance of a sample of publicly traded CLO ETFs based on historical returns. The sample encompasses various CLO ETFs that target a range of tranche seniorities, reflecting different levels of credit risk as indicated by their ratings. Additionally, the performance of BSL ETFs, from which we selected a sample, is considered to provide a reference point, given that a CLO tranche is fundamentally a derivative of its underlying BSL portfolio.
Our analysis of the historical daily returns and correlations of the ETFs indicates that over a longer period (such as two years), the risk/return characteristics amongst the ETFs are generally consistent with the underlying risk profile of the relevant ETF – i.e. similar performance levels for similar risks – and moderate correlations. However, an examination of daily CLO ETF returns and correlations over a short volatile period can exhibit a noticeable divergence in absolute and relative performance. These findings indicate that the ‘intuitive’ view that CLOs and BSLs are highly correlated may not be evident until there is significant market volatility. And even in that case, differences in performance indicate that other factors may be at play.
Our analysis found that CLO correlations may be further explained at times by vintage and underlying asset manager exposure rather than just broader BSL market dynamics. We offer additional insights and key factors that can impact the performance between CLO portfolios.
Historical Returns – Data
Our sample of CLO ETFs spans the range of tranche seniorities and the credit ratings scale – from CLO ETFs that focus primarily on senior tranches (rated primarily Aaa) to those that focus on investment grade mezzanine tranches (rated from Aa to Baa). And even to those that include some speculative grade tranches (Ba). Our study also considers BSL ETFs to acknowledge that CLOs are derivatives of the BSL market.
In this context, the relationship between CLOs and the underlying BSL market could provide additional insight into the performance of CLOs. We also included some other market related ETFs to gain additional insight as to the performance of the BSL and CLO markets relative to the broader capital markets. Thus, the selected ETFs can be grouped into three categories: BSL, CLO and other broader markets.
BSL Category
We selected four BSL ETFs that are managed by well-established asset managers and have benchmarks to broad BSL indices.
Table 1: List of BSL ETFs
CLO Category (BSL-Derived)
We selected a variety of CLO ETFs that invest in CLO tranches across the CLO capital structure, and with investments in CLOs across a range of vintage periods and asset managers.
Table 2: List of CLO ETFs
Understanding the underlying ratings distributions gives further insight into the level of exposures a CLO ETF has within a typical CLO capital structure. The CLO portfolios within our sample cover a range of credit risk exposures – from a fund with essentially 100% Aaa to other funds with a broader representation of investment-grade ratings as well as funds with concentrations of Baa/Ba credit risk[2].
Other Broader Markets Category
We also included ETFs that can provide additional perspective on the relative performance of the BSL and CLO markets to the broader capital markets.
In this context, we selected a small cap equity ETF (IWM) since many BSL borrowers would fall in the small cap category; a high yield bond ETF (HYG) since these issuers have a similar credit risk profile (though with different recovery rate and interest rate risks) as compared to BSLs; and a short-term Treasury fund ETF (VGSH) to provide some benchmark of shorter-term risk-free interest rates.
Looking at Financial Performance
We focused on the risk-return and correlation characteristics across the ETFs. We looked for insights into how the ETFs performance behaved with one another within the same category (‘intra-category’), and across categories (‘inter-category’) over different time periods. We observed that both intra-category and inter-category performance and correlation metrics depended heavily on which period we selected. We found that during the most recent market volatility (April 2025), patterns emerged that were not so evident during calmer periods.
In some cases, the correlations we observed between the BSL and CLO ETFs were not as consistent as expected. Understanding that CLOs are derivatives of the BSL market, we initially expected to see a relatively higher degree of correlation across all market environments, but the correlations across all market environments varied. This observation suggests that not all CLOs track the same broad ‘BSL market’.
We also found that CLO performance could be influenced by unique factors related to range of vintage periods of when the underlying CLOs were issued and the overall exposures to common CLO asset managers.
These findings show that these variations across CLO portfolios can offer an opportunity for CLO investors to diversify their BSL and BSL-derivative portfolios to better optimize their specific risk-return objectives. In other words, not all BSL and CLO ETFs are alike.
Historical Performance – ‘Normal Times’
We chose two distinct historical return periods to begin our comparative analysis. One that we could classify as a ‘normal’ period and the other as a ‘volatile’ one. We chose the month of April 2025 as the volatile period. This period reflected significant market volatility due to the rapidly changing global trade outlook and economic uncertainties associated with the related US tariff announcements.
We selected the two-year period from April 2023 through March 2025 as a proxy of ‘normal market conditions’ and can be considered somewhat as a benchmark. Exhibits 1 and 2 show the historical return statistics and correlations of daily returns for each of the ETFs, respectively. Note that two of the ETFs in our sample were not in existence for the full two year-period analyzed. Thus, summary stats are not available, and correlation stats apply only for the respective period that each of these two ETFs was in existence.
We note that the return and risk characteristics across the ETFs are generally as expected within each investment category and subcategory. For example, among the BSL ETFs we note that there is no material distinction among the standard deviations and coefficients of variation. Among the CLO ETFs, the riskier CLO ETFs with lower rated tranches show higher volatility and coefficients of variation as compared to those CLO ETFs with higher rated tranches. The high yield bond ETF was the most volatile among the credit-sensitive ETFs. As expected, the small cap stock ETF was the most volatile while the short-term Treasury ETF was the least.
Exhibit 3 summarizes the cross-category correlations of historical daily returns. These are based on simple averages of correlations amongst the ETFs within their respective categories. The text box on the right provides guidelines for assessing the correlation results presented in this paper.
During ‘normal times’ NONE of the observed correlations were assessed to be Strong or Very Strong. All the correlations were assessed to be in the Moderate and Weak/Very Weak categories. Only 4 of the 22 observed correlations were assessed as Moderate while the remaining 18 were Weak / Very Weak. Three of the four that were Moderate, were related to the BSL category – BSLs to: BSLs, HY Bonds, and small cap stocks, respectively.
These observations suggest that during normal times, the correlations were not particularly significant for the CLO ETFs. Furthermore, CLO performance did not appear to be materially correlated to other credit risk assets, including the BSL market. Even within the CLO category, correlations were relatively marginal across the CLO capital structure, which suggests that movements in CLO tranche risk premiums seem to be more idiosyncratic during stable markets. These results are not surprising given that the CLO tranches are supported with credit enhancement – unlike CLO equity tranches, which we would expect to be more sensitive.
As previously explained, we defined the ‘volatile’ period to be the month of April 2025, a period of significant market volatility. Exhibits 4 through 6 show the various historical return statistics for the ETFs during this period.
One can immediately notice the significant jolt in the related risk statistics for all ETFs and the correlations among them. Below are some noteworthy observations based on the comparison of risk statistics between the two periods.
CLO ETFs experienced the largest increase in risk measures, measured both by volatility (4x to 11x increase) and the range of daily returns (1.5x to 4x higher).
BSL ETFs experienced roughly a 4x increase in volatility and about a doubling of the range of daily returns.
Traditional ‘risk’ asset categories of high yield corporate bonds and small cap stocks did not show as much of a relative increase as the BSLs and CLOs – a relatively modest 2x increase in volatility and a 50% increase in range of daily returns. These asset classes, albeit riskier as they are typically subordinated relative to BSL, are more liquid and established markets. For the short-term Treasury ETF, the risk performance in April 2025 was relatively indistinguishable than during the ‘normal’ period.
With respect to correlations, our observations show a sharp increase. Whereas during ‘normal’ times, correlations are not meaningfully significant, this changed during ‘stressed’ markets – half of the observed correlations are now assessed to be Strong and Very Strong (11 of the 22 observations) whereas 3 of the 22 are now Weak/Very Weak.
While correlations increased substantially, there were still some areas of divergence in performance that are worth noting. For example, the CLO ETFs such as the higher rated investment grade CLO ETFs show moderate correlations to all other asset classes. This implies that CLO ETFs may offer some diversification benefits (especially as you move up the capital structure associated with greater credit enhancement) even in stressed markets. However, the CLO ETFs with lower-rated tranches did show very strong correlations to the ’risk’ assets, but that is to be expected given their tranches’ higher degree of credit risk exposure associated with lower levels of credit enhancement.
A detailed attribution analysis of the underlying CLO ETF performances is outside the scope of this paper. However, we performed some high-level reviews of the CLO portfolios to look for potential factors that could affect the performance of the CLO ETFs and help explain some of the correlation behavior CLOs experienced, especially during the ‘volatile’ period as CLOs appeared to exhibit lower intra and inter correlations than the other asset classes.
Additional factors beyond market considerations appear to emerge when we look closer at the CLO portfolios. In addition to diverse capital structure exposures, we observed that the CLO ETFs had relatively diverse CLO vintage exposures. While exposures to common asset managers across the CLO ETFs could be significant, we noticed that the exposures were often across various CLO vintages of common managers.
Investing across CLOs with unique asset managers can provide diversification benefits despite targeting the BSL market. Different managers may have varying investment styles, strategies, size (or AUM), as well as industry/sector and credit expertise.
Notwithstanding the fact that a CLO portfolio may consist of several CLOs managed by the same entity, there can be advantages from diversifying across vintages. CLOs can be executed under different market conditions and potentially with variations in reinvestment criteria, even given identical CLO portfolio managers. Furthermore, CLOs from different vintages may be at various stages in their lifecycle, such as the reinvestment or amortization period, which also affects the level of a CLO’s reinvestment activity, as well as being past their non-call period, which can indicate the degree of potential refinancing activities.
Conclusion
ETFs composed of CLOs, with underlying BSLs, have experienced significant growth in recent years. While retail investors had access to funds of BSLs for over 30 years, the first publicly traded CLO ETF was introduced in 2020. This is noteworthy since a large part of the BSL market is held by CLOs and thus offers a broader group of investors to participate in the BSL-derived market across various risk/return profiles.
This paper analyzed the performance of CLO ETFs based on a sample of historical returns. The sample included different ETFs that target a range of CLO tranche seniorities, representing varying levels of credit risk. The performance of some BSL ETFs was also reviewed since the performance of a CLO tranche is essentially derived from its underlying BSL portfolio.
Our analysis of the historical daily returns and correlations of the ETFs show that over a longer ‘normal’ period, co-movements in performance are moderate and the risk/return characteristics across the ETFs are generally consistent with their underlying risk profile. However, CLO ETF returns and correlations can exhibit a noticeable divergence in performance and increase in volatility over a shorter period of extreme uncertainty. An example of which was during the recent period of market fluctuations caused by the US tariff announcements.
We also found that CLO correlations can be explained further by key factors such as the distribution of exposures to: (1) seniorities of the CLO tranches, (2) the vintage periods of when the CLOs were issued, and (3) asset manager overlap within a CLO ETF portfolio.
The bottom line is that CLO ETFs appear to offer investment diversification benefits and that not all CLO ETFs are the same, even given similar credit risk. While performance may appear to converge during stressful times, key differences in performance is also evident.
[2] Although some of the CLO ETFs may report CLO tranches that are “not-rated”, this is not technically correct in all cases since some ETFs generally report ratings only from the two largest and widely recognized NRSROs. Nonetheless, “non-rated” tranches may still be less liquid and more volatile given the absence of a rating from one of the two largest NRSROs, but likely to offer higher yields.
Keynote interview
Fit for the future
Michael Janiszewski shared his insights in December’s PEI Perspectives report about what tools, technologies and support GPs and LPs will need to set them up for 2025.
Michael Janiszewski
Chief Operating Officer
December 5, 2024
Interview
How important is a manager’s operating model to its fundraising success in today’s market? To what extent has this changed and why?
Private markets assets under management have more than trebled to $14.5 trillion over the past decade, according to analysis by Bain & Co. In a climate of increased competition, LPs are placing a growing emphasis on private markets firms’ operating models.
This is in part because LPs have substantially larger pools of capital invested in private markets today. As a result of these larger exposures, they are leaning towards managers with robust operating models in order to limit the downside risk.
At the same time, managers with best-in-class operating infrastructure are better positioned to collect, analyze and harness data to improve deal origination, execution and portfolio company performance. Of course, dealmaking will always remain the core priority for managers, but GPs have come to realize that back-office capabilities and operating models can contribute to front-office success and play an important role in supporting future fundraising.
What areas are LPs scrutinizing in particular? What are the must haves and the red flags for investors doing their due diligence on operating models prior to committing to a fund?
Investors are certainly demanding more when it comes to reporting, compliance and technology. Having the right bespoke operating model in place puts GPs in a better position to differentiate their firms through speedier, more detailed, value-add reporting to investors. In addition, LPs are looking to interact with their GPs in a more digital and data-driven manner, gaining access to information about investments in new and deeper ways.
As well as supporting fundraising, how else can fit-for-purpose, future-proofed back-office infrastructure support front-office activities?
A rigorous back-office capability is essential for GPs who want to offer more co-investment opportunities, take advantage of the liquidity offered through NAV financing, or are considering GP led deals that require solid accounting and reporting frameworks. These are all inherently data-driven activities, which means that the way in which they will ultimately be delivered will be through the use of technology.
What role is technology playing in supporting the modern private equity operating model more generally, and what opportunities does this present?
Technology is undoubtedly playing an ever more important role across the private equity industry. This initially played out in the back office, with various types of financial statement reporting, cash management solutions, as well as workflow and case management tools coming to the fore. Then, in the middle office, we started to see a focus on fund performance and portfolio monitoring, with information being collected across asset classes to support risk management and sophisticated reporting.
Finally, in the front office, technology is now being used to support investment and diligence processes, as well as investor relations. What I think is particularly new and exciting is the proliferation of specialist private markets tools that we are able to leverage today. This is in complete contrast to what was available a decade ago.
It used to be that if an alternatives manager was looking at an aircraft lease, for example, we would have to adapt that into the fund accounting system in the form of some sort of bond. That is no longer the case. Technology now has the language of alternative investing built into it, enabling us to provide different views on risk, better access to data to support superior decision making, and allowing LPs to actively monitor their investments.
The other area where we are seeing significant changes, and where development is primarily driven by LPs, is an enhanced digital experience. It’s still early days, but we are seeing generative AI being used to answer client queries, to leverage large knowledge bases and to respond to requests for proposals. Then, from an operational perspective, optical character recognition is being widely used to make tasks that were historically manual more automated.
Looking ahead, I cannot think of a single operational function where we won’t be using some sort of AI to either extract or manage information differently, or to start drawing conclusions based on that information to support reporting or decision-making, at some point in time.
However, the focus should not just be on AI, but automated machine learning as a whole the process of taking upstream and downstream data and standardising it – given the sheer volumes of financial documents that come into play.
To what extent is artificial intelligence being integrated into digital solutions?
Technology is being used to create great UI, visualization and mobile access, for example. A wide variety of digital interactions – from something as simple as getting a K-1 in the US to performance analysis, cashflow fore[1]casting and benchmarking – have all become, if not the norm, then certainly the expectation for investors. Alternatives have become a much more digital and data-driven industry.
Is the rapid adoption of technology also creating challenges?
I would say the biggest challenge for managers involves data management. While we have made great strides in systems that speak the language of alternatives, we are nonetheless faced with significantly increased demands from clients – both GPs and LPs – when it comes to managing that data. Of course, the cloud has helped us a great deal in that regard, but there is still a lot of hard work involved in operationalizing data that has historically been manually inputted into spreadsheets. Finding ways to ensure that data can be accessed and analyzed in sophisticated ways is something that will certainly be enabled by technology, but there is still some way to go.
The service that an administrator provides reflects directly on the manager. It is a reputational issue for GPs, and therefore for LPs too. LPs are looking to interact with their GPs in a more digital and data-driven manner.
How are all of these developments impacting the decisions that managers are making around what to outsource and what to keep inhouse, and how are third-party providers responding?
Rather than investing large amounts of capital into ever-expanding back-office teams and technology, managers are increasingly working with third-party administrators in order to benefit from the scale, cost advantages and specialized back-office focus. This enables managers to instead invest capex into their core business of dealmaking. In response, fund administrators are evolving their offering from the provision of basic outsourced fund accounting services to providing technology best practices, together with support for managers to enable effective implementation and harness technology in modular operational models.
What is particularly exciting for us is that we are receiving a lot of inbound interest regarding solutions to many of the challenges that I have described. Those enquiries sometimes center on the use of data to support better investment decision-making, for example, or the need to provide different types of information to end clients.
The focus can also be on improving the manager’s cost profile. In short, managers are looking to third parties to fulfil functions that they either can’t or don’t want to invest in at the level that an external provider can. Another driver, meanwhile, is the desire from managers to partner with organizations that are able to glean insight and experience from working with market participants across the entire industry.
As a result, third-party administrators are being approached not only as outsourced service providers but as accelerators for the strategies that their clients are trying to implement.
Is the choice simply between insourcing and outsourcing, or are other models emerging?
Co-sourcing is certainly a trend. That is something that managers are talking to us about and it is something that we have the flexibility to implement. However, I would add that most of those conversations are followed by questions about what our plans are as a third-party administrator to provide some of those functions in a fully out[1]sourced manner.
Co-sourcing is typically seen as a step on the journey towards outsourcing.
What questions should LPs be asking of a potential outsourced provider?
Operational excellence is, of course, incredibly important in this space, because the service that an administrator provides reflects directly on the manager. It is a reputational issue for GPs, and therefore for LPs too. Other sources of differentiation among third-party providers include the degree to which these organizations are investing in their own core systems and operations in order to take advantage of industry trends. GPs should also select an expert partner with firsthand experience in managing processes across multiple strategies and different investment vehicles.
An understanding of cross-jurisdictional knowledge is also vital, should they wish to expand investment beyond their regional boundaries. In addition, LPs should consider the extent to which administrators are investing ahead of the curve, thinking about the next wave of innovation, whether that be generative AI, sophisticated data management or the provision of different ways for LPs to access information.
That kind of forward-thinking approach can help put managers on the front foot when fund[1]raising, and give LPs the comfort that operations are being well run by experienced industry specialists, and that it can scale as their firm grows.
What is your number one piece of advice for a manager re-evaluating its existing operating model with the intention of building something that is sustainable and that will allow it to scale?
My number one piece of advice would be to take time to review the market. I would add that it is also important to understand that the role of the fund administrator has changed.
Today, the right outsourced partner can provide operational support from back-office accounting, all the way through to client services, thereby enabling firms to focus on their own value proposition in a very different and much more sophisticated way.
Chief Operating Officer, Mike Janiszewski spoke to PEI Fund Services report about the value of outsourcing administrative functions to respond to the increased market demand from individual investors. Get in touch to partner with a proven third-party provider to harness this potential.
Mike Janiszewski
Chief Operating Officer
June 4, 2024
Mike Janiszewski, Chief Operating Officer, spoke to PEI Fund Services report about the value of outsourcing administrative functions to respond to the increased market demand from individual investors. With about half of global assets under management (AUM) held by individuals, private fund managers are keen to tap into this vast potential. Large asset managers, like Blackstone, have ambitious goals for increasing their retail capital offer. However, accommodating individual investors in alternatives, presents significant complexity- complicated structures, dealing with varying regulations, individual tax burdens and increasing back-office administration.
Mike opined that “Taking on investment from private wealth investors will require a step-change in middle- and back-office infrastructure” Private markets have responded to this already and multiple investment structures are being adopted to accommodate the differing needs of individual investors, as well as new distribution channels and digital platforms. At AD, we have been specializing in this for the past 20 years; delivering for our clients via a combination of jurisdictional, technological and administrative expertise.
Ultimately, leveraging technology for automation and data streamlining must come alongside partnership with third-party providers who can harness new tools for great success. Reach out to to find out more.
