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SEI Research Reveals High Data Replication Issues in Private Markets Management

In an insightful study released by SEI® (NASDAQ: SEIC), it was discovered that a staggering 43% of private market asset managers struggle with operational inefficiencies stemming from data replication and fragmentation. This research, conducted in collaboration with Cutter Associates, highlights a pressing issue within the private market fund administration space.

Context of the Research

The survey reflected feedback from asset managers based in the U.S. and the U.K., focusing on their operational challenges regarding fund administration and the replication of data across multiple service providers. As the global private market's assets under management have surged nearly 20% annually since 2018, the need for streamlined operations has never been more critical in managing the complexities that come with scaling.

Phil McCabe, the Head of SEI's Investment Managers business, noted that the increasing number of fund administrators, often necessitated by regulatory compliance or cross-border transactions, complicates data management. Consequently, this duplication of effort places a significant burden on firms as they attempt to efficiently oversee their portfolios.

Key Insights from the Study

The research presents several noteworthy insights regarding the state of private market fund administration:

• - Widespread Duplication: A significant number of firms (55%) maintain an internal accounting record, which leads to redundancy in their operations. Forty-three percent of respondents indicated that over half of their non-investment staff is engaged in overseeing or replicating data functions.
• - Costly Replication: The repercussions of this replication are not just financial. One-third of participants are apprehensive about the escalating technology costs associated with managing these duplications. Notably, about 47% of firms reported that delays in replication could postpone their reporting by more than three days, threatening vital data visibility.
• - Preferred Administrator Strategies: While the majority of firms are juggling multiple administrators to manage their funds (57% indicated relying on several), a substantial 58% believe that one primary provider would be ideal, with 21% preferring just two administrators.

As firms grapple with the reality of these operational challenges, it is evident that the desire to maintain existing systems and mitigate associated risks can lead to a resistance to change despite the inefficiencies.

Shifting Toward Improved Strategies

The study shows an evolving landscape where the replication model is beginning to change. Around 24% of firms are actively trying to minimize replication issues, while 55% would consider doing so in their future strategic plans. Notably, 62% stated that the ability to reduce replication influences their choice of fund administrator.

In light of these findings, Bryan Astheimer from SEI's Investment Managers business in EMEA commented, "The rising complexities require firms to not only meet investor demands but also optimize operational efficiencies. A consolidated approach with fewer strategic partners that provide data quality, multi-domicile capabilities, and system integrations holds the key to navigating this evolving landscape."

Looking Ahead

To address these challenges, firms may need to reassess their operational approaches and consider leveraging modern fund administrators as strategic partners. By starting with focused product launches and gradual implementation, asset managers can embark on a more sustainable transformation journey.

This research sheds light on the pressing realities faced by asset managers in private markets, calling for a more consolidated approach to data management to not only streamline operations but also enhance growth potential in an increasingly competitive landscape.

In conclusion, addressing data replication issues in private markets is crucial for operational efficiency. As asset managers explore partnerships with modern fund administrators, they pave the way for more strategic and effective fund management practices.