Outsourcing Private Equity Services for Outstanding Outcomes

The private equity (PE) sector has been a powerhouse of resilience and growth, even amidst the shifting global economic landscape. A testament to this growth is seen in the U.S., where the value of private equity deals soared more than twofold between 2020 and 2021, exceeding an astounding one trillion dollars. Just within the first three quarters of 2022, private equity deals have already reached an impressive value of approximately 562 billion U.S. dollars.

In this fast-paced, high-stakes environment, investors are demanding careful allocation and strategic planning of funds more than ever before. This critical need has fostered an increasing trend toward the outsourcing of vital roles such as accounting and administration. The aim? To bolster investor confidence and optimize operational efficiency, thereby yielding superior outcomes.

Leveraging the Expertise of Third-Party Service Providers

Outsourcing private equity tasks allows firms to partner with third-party providers of middle and back-office services who offer unrivaled operational expertise at a cost-effective price. This symbiosis extends beyond financial implications; it affords managers the luxury of time to focus on other essential elements of the business, such as assets and employees.

BPO service providers provide highly skilled experts wielding advanced industry knowledge and cutting-edge technologies. By outsourcing administrative tasks, managers have direct access to these resources without the overhead costs of hiring in-house.

Benefits of Outsourcing in Enhancing Efficiency

When PE firms collaborate with trusted partners, they augment their effectiveness across different fronts, including sourcing deals and optimizing investor funds’ performance. They can also streamline investor relations tasks, such as managing capital call letters, cash flows, and capital contributions. This collaborative approach ensures operational transparency and accuracy, leading to fewer mistakes in financial audits and fostering investor confidence.

The industry-wide acceptance of outsourcing as a strategic and competitive advantage over in-house administration signals a paradigm shift. Outsourcing has transitioned from a trend to an established pattern, one that has attracted the appreciation of discerning investors. By partnering with a third-party asset management provider, a PE firm can devote more time to:

• Identifying investment opportunities
• Evaluating potential transactions
• Monitoring valuations
• Managing the current portfolio
• Building robust communication channels with limited partners (LPs)

The Power of Partnership

The success of outsourcing hinges on the partnership between PE firms and third-party asset management service providers. These service providers need to act as an extension of the PE firm, a seamless blend that requires open lines of communication and mutual trust.

Investor standards in the current market are lofty, making it crucial for PE firms to demonstrate a high level of expertise, cost-efficiency, and reliable information flow. When the third-party vendors mirror this level of transparency, it reassures investors and allows for an interactive relationship with service partners.

Finance as a Service (FaaS) companies have championed this approach, embracing transparency in their service offering. This transparency extends to their financial operations and interaction with the investor, further bolstering investor confidence.

Key Advantages of Outsourcing

Investment management services outsourcing offers three main advantages to companies who are actively seeking ways to streamline operations, reduce costs, and enhance efficiency in response to the current and predicted economic drivers:

Finance & Accounting Expertise: Clients can access a pool of industry experts with extensive knowledge in finance and accounting.

Real-time Access to Financial Data: Outsourcing services often include advanced, flexible technology that provides real-time access to financial data.

Cost-efficiency: Outsourcing delivers a high level of expertise and service at a fraction of the cost of hiring in-house staff.

The tasks mentioned below are crucial functions that asset management firms typically outsource to BPOs, utilizing Automation, Business Intelligence, and PPTS framework for enhanced efficiency.

• Tailored Asset Management Solutions: Services designed to address specific organizational needs, covering aspects like portfolio design, securities, risk management, and cash flow management.

• Fund Administration & Accounting: Services that span from simple bookkeeping to complex accounting tasks, making use of automated accounting systems for streamlined financial operations and precise reporting.

• General Accounting: Solutions that help streamline accounting transactions and provide improved control and insight into financial accounts. Automation simplifies processes such as invoicing and cash flow management, facilitating accurate tracking and reporting.

• Trade and Position Reconciliation: Services involve assembling a team of certified finance professionals to assist in brokerage, trade, position, and case reconciliation.

• Financial & Management Reports: Technology-driven solutions for the automatic generation of accurate and timely financial documents, including monthly, quarterly, and annual reports, bank statements, tax filings, and more.

• Risk Management: Risk management specialists identify potential risks that could affect cash flow, increase insurance costs, and pose other threats to a business. Advanced technology is used to assess these risks and implement strategies to minimize business losses.

• Private Equity Solutions: Specialized financial consulting services offering tailored assistance to medium and large-scale businesses, with expertise in areas such as financial planning, mergers and acquisitions, operational efficiency, and cost optimization.

• Venture Capital Services: Solutions that help attract institutional investors and secure capital by outsourcing functions associated with venture capital investment. These services significantly reduce overhead costs and involve collaboration with industry experts and the latest technology.

Trends in PE Space

The landscape of outsourcing within the PE space is dynamic, guided by investor pressure, regulatory compliance demands, and product complexity. With investors increasingly preferring firms that use third-party financial administrators, the outsourcing trend shows no sign of slowing down.

In conclusion, the outsourcing of investment management services in the PE space has evolved from a luxury to a necessity. As the scales tip towards global adoption, the benefits of outsourcing, operational efficiency, investor confidence, and cost savings will continue to drive this trend, yielding outstanding outcomes for PE firms.

Infinit-O partners with the world’s fastest-growing technology, financial, and healthcare services companies that want to scale and advance their brands. Demonstrated by our world-class Net Promoter Score of 67+, we deliver the highest quality outsourcing services using our unique data-driven approach – combining powerful technology and high-performance teams within our highly-engaged and agile culture. Our expertise includes CX, engineering, data science & analytics, sales & marketing, and back office services.

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