Data management, compliance and portfolio monitoring tools will account for the largest proportion of private funds technology spending over the coming year, a survey by SEI found.
Just under half, 48 percent, of general partners participating in the fund administrator’s survey said they would invest in data management and compliance technology, while 44 percent said portfolio monitoring tools were on their buy list.
“IT budgets are clearly focused on addressing operational challenges; compliance is rated as the single most challenging aspect of managing a diverse set of strategies,” SEI said.
More than a quarter of the participants, 28 percent, said compliance was the most pressing operational challenge, while 82 percent said compliance costs were rising faster, or much faster, than other operating expenses.
Data management was the next most pressing operational concern, cited by 25 percent of participating GPs.
Operational challenges have been exacerbated by recent structural changes in the market, in particular the rising level of transparency, GPs agreed. Limited partners are now increasing their operational due diligence either by engaging independent consultants (27 percent) or by increasing their own internal capabilities (38 percent), the survey found.
Almost all LPs, 98 percent, expect GPs to provide quarterly reporting, while 93 percent require financial statements, the survey found.
“One out of three set the bar even higher by insisting that GPs provide for data mapping into their portfolio monitoring systems. Those interested in this level of integration may currently be in the minority, but it is likely that their ranks will grow, especially as systems providers increasingly position themselves as being able to accommodate these requests,” SEI said.