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Private markets growth must consider operational resilience

Back in April, S&P Global stated that ‘the spotlight is now firmly on private markets’. However, the company also referenced the current economic climate, stating that private markets are ‘operating in waters that are still running deep’.
Sumit Mahajan, CAIA, FRM
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Back in April, S&P Global stated that ‘the spotlight is now firmly on private markets’. However, the company also referenced the current economic climate, stating that private markets are ‘operating in waters that are still running deep’. The consultancy went on to detail that ‘markets are subject to higher interest rates, inflations and economies are slowing’. Such conditions are proving to be challenging for private markets, presenting key risk factors of illiquidity and opacity, leaving some investors with difficult choices.

Opportunities for growth are there for the taking within private markets. Business risk is viewed as higher by traditional investors in small and medium size enterprises who are can be seen as more vulnerable in the event of disruption in the market. There is greater pressure on traditional lenders such as banks as they feel a tighter squeeze on their balance sheets hindering their willingness to lend. Yet, this very problem provides firms operating in the private credit funds space with an opportunity to work with enterprises who have excellent prospects but do not appeal to the traditional lender.  

Firms that fall into this category must showcase their strength to potential investors, and illustrate their operational efficiency and resiliency, as well evidencing a holistic view of data management and a strategy to safeguard security of assets.

Early in the year, PWC also shared a private markets outlook report which stated that whilst economies remain fragile, ‘the largest capital deployment opportunities will most likely be evidenced through rescue financing, direct lending, infrastructure and real estate’.

At Portfolio BI (PBI), we understand the need for operational excellence in order to secure growth which is why we designed PBI Investment Management System (IMS). PBI IMS is a enterprise delivered, front-to-back Order Management (OMS) and Portfolio Management (PMS) solution with multi-asset class support, including private credit and debt, which provides clients a real-time view of trades and positions. By using one central platform, PBI OMS fully integrates and enables straight-through processing in order to reduce errors, increase operational efficiency and lower operational risk. We provide clients with comprehensive support that enables firms to thrive operationally whilst also retaining a 360 view of data management and the market.

It is imperative that firms can maintain an accurate and holistic view of their portfolios. Through the design and development of PBI PMS, firms are able to consolidate information from multiple systems into a comprehensive analytics dashboard. Through the platform, firms are able to see a broad range of analytics in real time such as the ticking views of positions, exposure, P&L, performance and risk.

The future of the private market space presents great opportunities. In order to secure the future, firms must showcase operational resilience and assure investors, through the utilisation of tried and tested technology, as well as showcasing best in class operational risk management.

References
https://www.pwc.com/gx/en/industries/private-equity/private-markets/private-credit.html
https://www.spglobal.com/en/research-insights/featured/special-editorial/look-forward/private-markets-still-waters-run-deep

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