The popularity of debt funds and the range of options available are attracting a growing number of General Partners. But while the debt market is forging ahead, the administrative expertise may be lagging behind.
While many firms are expanding into debt funds or adding to their existing debt portfolios, not all of them have the back-office expertise they need to administer this complex strategy. As a result, debt fund managers are more likely to run into problems associated with back-office operations.
90% of private credit managers report that they are
experiencing issues with their loan administration.
General Partners who need to manage funds of increasing complexity have two options: they can augment their investment in in-house talent and technologies, or they can outsource administration to a professional third party.
Faced with the choice, many firms are opting to outsource. As of year-end 2017, USD$8.42 trillion in alternative assets were managed by outsourced fund administrators, an increase of more than 10% compared to 2016. The trend was even more pronounced among private equity and debt assets, which saw an increase of 18.2% from the previous year, making it the asset class with the fastest growing adoption of this outsourcing option. At the end of 2017, assets under administration (AUA) for private equity and debt totaled USD$2.49 trillion.2
1 AIMA, Enhancing the Loan Administration Function: Marrying Capacity and Customisation, 2018.
2 eVestment, Industry Survey: Alternative Fund Administration, May 2018.