For many ambitious Alts or Private Capital firms, a slow and hard-to-coordinate fund setup process is causing ripple effects: It risks slowing down capital raising, it can prevent investment teams from taking advantage of market opportunities, and it creates havoc for finance and operations.  As the industry is maturing and fee income is becoming an increasingly important part of value creation, firms must industrialise the fund setup process.  

The Challenge: Accelerating complexity, SMAs, siloed IT systems
As the industry is looking to scale invariably this means an acceleration of new investment strategies, new geographies, and providing LPs with the ‘right’ fund structure or vehicle.  The proliferation of funds, the rise of SMAs (separately managed accounts), demanding LPs (think ESG and reporting) and complex fee structures are all putting pressure on the fund setup process. 

Typically, the process relies upon best efforts of multiple teams including BD, IR, Legal, and Finance who increasingly struggle to co-ordinate activities and communicate across the silos of internal functions and third parties (particularly lawyers).

With growing teams and numbers of funds – from standard large co-mingled flagship funds right the way through to tactical special situations and CLOs and SMA – keeping track of status and tasks across multiple spreadsheets and emails make makes it hard to work effectively and almost impossible for senior management to have an accurate picture.  

Complexity is further fuelled by more fine-grained investment mandates (e.g. ESG) and increasing compliance requirements.  The LP universe is also changing; the largest LP are becoming more demanding (think SMA, co-invest and reporting) whilst one the other end of the spectrum retail investors is expected to become one of the biggest sources of new capital.  

Of course, the increasing M&A activity we are seeing in the sector is adding fuel to the complexity fire.  Suddenly the number of funds grow by 30% over night and you have two sets of poorly defined processes to deal with.

The Challenge: Fund Setup impacts ‘all’ processes 
Given the interdependency between fund setup and other processes, poorly defined (and understood?) processes are making good data stewardship impossible.  This in turn makes reliable reporting near impossible and represents a greater risk to these firms. 

A poorly working fundraising process will impact investor onboarding and a host of other areas from fund allocation, mandate compliance to allocation.

The Solution: Process and Data Ownership & Workflow Automation
It is tempting to think ‘let’s put some tech in place to fix this’.  However, given how intertwined the fund setup process is with other functions and historical investment in (often siloed) systems, it is critical to map out the processes.  Without clear process understanding, data related to the process is close to meaningless.

Assigning process owners responsible for the end-to-end process through the silos is hard but necessary to enable digitalisation and the mastery of data.

Once armed with a good understanding of the process, the data involved and dependencies with other processes, it is then time to implement workflow automation.  Workflow automation will ensure that the processes are executed as defined, maximise the use of standard processes and templates and minimise risk of errors or delays when ‘tasks’ as passed between functions (including third party providers).  Workflow automation also guarantees good, reliable underlying data on top of which meaningful dashboard can be built and shared with the business.  As the old saying goes ‘if you can measure it, you can’t manage it’. 

Next Steps: Contact us for a demo of our fund setup workflow automation solution.

For further details contact
Alex Tyler – Head of Alternative Assets & Private Capital
E: alex.tyler@pskinetic.com
www.linkedin.com/in/alextylerpskinetic/
07412665914