The rapid growth of private markets has created a number of data challenges for fund administrators, according to recently published research.
The study, commissioned by two tech vendors Accelex and FactSet and entitled Unlocking Operational Excellence in Fund Administration through AI, found that the majority of fund administrators (55%) cite data acquisition and data governance as their primary operational challenge.
There are “significant concerns” around data availability, accuracy and timeliness which have been exacerbated by the growth of private markets which it itself driven by the inclusion of retail investors and the growth of private credit.
This has led to increased data volumes, complexity and reporting demands, according to the report.
Another contributing factor to the data struggles is the market’s reliance on outdated and fragmented systems – on average, fund administrators are using six different core systems, creating cyber security risks and operational inefficiencies.
The growth of private markets has also led to human resource struggles with 17% citing scarcity of specialized skills, a lack of long-term incentives, and fatigue due to manual processes.
The report also covers some of the steps taken by fund administrators to mitigate their data issues.
A quarter (25%) are focusing on process automation, although these efforts are hampered by the poor quality of underlying data. To compound the issue, just 11% of fund administrators are focused on improving data quality and accuracy.
“Private markets’ rapid growth has fundamentally reshaped the demands of the buy-side, including fund administrators, driving a need for more timely and accurate data,” said David Mellars, senior vice president and senior director of buy-side middle office product management at FactSet.
“Better tools will help all market participants overcome data quality challenges, reduce inefficiencies, and meet rising client expectations with precision and confidence.”
The study involved interviews with 16 fund administrators collectively administering more than US$13 trillion in assets.
