Ahead of Alfi’s annual Private Markets Conference getting underway in Luxembourg next week, conference attendee Maryam Longrus, head of new initiatives Capital Markets at FIS Global sets out how the macroeconomic environment has affected the pace of fundraising
Since 2022, fundraising has been battered by the drop in public markets and decoupled performance of private markets impacting investor allocations due to the denominator effect. Lower valuations and higher interest rates slowed exits and hence distributions back to investors to free capital for other fundraises. Interest rates have an unequal impact across GPs and strategies, challenging small to mid-size managers and buyout funds, respectively, but fuelling private credit funds. As valuations normalize, the flock to well-known managers is tempered by an increased focus on diversification in the face of continued geopolitical and environmental risks. Many managers increased strategic focus on the investor experience, leveraging modern technologies to improve the end-to-end experience from fundraising to investor reporting to increasing the pace and efficiency of the diligence phase and increasing their competitive advantage.
Private markets have been slower than other financial sectors to embrace AI. Are the signs of this changing?
Private markets are generally a conservative and measured culture taking great care of proprietary data, all of which tempers the race to adopt the latest in cutting-edge technology. Many firms immediately realized the prerequisite needs, focusing first on modernizing outdated databases and undertaking critical transformations in data strategy. This strategic focus on data has illuminated opportunities to implement applications leveraging AI in highly practical and precise applications, such as data scraping and collection. The proliferation of these practical applications is leading to further exploration for other use cases such as investment strategy, risk management and portfolio management.
