Private Equity assets have risen from $30 billion to $4 trillion in the past two decades. Increasing regulatory pressures and technology demands mean that private equity firms are turning to Fund Administrators to provide independent administration services.
Three key reasons for this anticipated growth are:
Investor demands for greater independence and transparency;
Increased regulatory pressures; and
Need for collaboration between Managers, Administrators and other service providers.
The challenges for managers will be multi-faceted: From a regulatory point of view, AIFMD, FATCA, MIFID II and Dodd Frank are just some examples of highly complex regulations that funds must now adhere to. Added to this is the pressure from tax authorities that fund managers face as they seek to go global. There is also mounting pressure from investors who are demanding further transparency, customization and lower fees. As a result, managers will seek more assistance than ever from their service providers to streamline their operations. Smart administrators are responding to these challenges by offering a greatly expanded role that actively adds value to the client’s proposition.
Cyber Security remains a big threat to the industry
Cyber Security will continue to be a huge issue in 2019 and the coming years. The rate of incidents continues to escalate, alongside ever-increasing media coverage. Several Fund Administrators are reeling from the negative fallout from recent SEC fines and pending law suits in relation to breaches of their cyber security. The failure to report incidents is playing into the hackers’ hands as they get better and more sophisticated at stealing.
Start-up market will be strong in the us while uncertain in Europe
The start-up market for Hedge funds and Private Equity funds will continue to be strong in the US, but the outlook in Europe is uncertain, especially for hedge fund start-ups.
The growing cost of regulation in Europe combined with continued pressure on fees has seen many of the region’s smaller managers close up in the last 12 months. Some closures of smaller firms in Europe may be expected as investors move to larger managers where economies of scale can reduce fees.
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