Navigating the Changing Landscape of Private Equity

The past 15 years have seen a surge in private equity in nearly every respect—in assets under management, the number of funds, managers and investors, the variety and complexity of fund structures, the size of the private company universe, and, most significantly, in private company valuations. Observers have called it a dramatic “paradigm shift” compared to the days before the 2008 financial crisis, when private equity was a fairly closed society. Fueled largely by institutional allocators seeking superior returns to the public markets, private equity has gone mainstream as an asset class.

In our “Private Equity: Navigating a Shifting Landscape,” whitepaper we explore this phenomenal growth and the challenges created by a more diverse, complex and competitive private equity market. Chief among these challenges:

• A growing private equity ecosystem has made it easier for managers to launch funds and for investors to enter the market, which increases competition for both fundraising and attractive deals.
• Institutional investors have higher expectations of transparency and standardized reporting. Fund managers have to communicate more proactively to attract and retain limited partners.
• ESG factors have an increasing influence on allocators’ investment decisions. Fund managers must be able to articulate their ESG strategies.
• Private equity funds are subject to much tighter regulation than in the pre-crisis era.
• The PE market has gone global, with all the challenges that implies.

The year 2020 brought yet another shift in the landscape: a reversal of two decades of declining interest rates, and inflation at a level not seen since the 1980s. Opinions are mixed on the duration and the impact of these cycles on the PE market, but investors and fund managers are exercising caution following an extended period of fairly unfettered growth and outsized returns.

Perhaps the most significant development is the need for private equity managers to have much tighter operational and risk controls. “Operational alpha” has become as much of a differentiator for firms as investment alpha. Managers must have systems and processes that stand up to rigorous investor due diligence and regulatory scrutiny, and that deliver the transparency that limited partners demand. Increasingly, that means today’s advanced technology is a competitive necessity.

As a long-standing service provider and technology partner to private equity firms, SS&C brings a wide-ranging, global perspective to the industry’s transformation, which we have witnessed firsthand. Our perspective can be valuable to both established players as well as new or prospective entrants to the market. Download our “Private Equity: Navigating a Shifting Landscape” whitepaper to get the benefit of our experience and insights.