Operational forecast for 2022
According to Alpha FMC’s Asset & Wealth Management Outlook report, private equity is about to see an overhaul of its operations during 2022.
Private equity predictions
1. Building firm and fund operating models for scale
The report predicts the industry will see an improvement of operating models to position businesses for scale across AUM and investment strategies.
2. ESG and responsible investment approaches
Firms are expected to ensure continued and growing investment to meet the market’s ESG/RI expectations.
Alpha FMC predicts this year, the industry will see more data sources for GPs, which require a data management strategy to ensure proper use as well as support data-driven decision making.
3. Improving data management and analytics
Additionally, PE houses will also be seeking deeper insights from portfolio data, as well as modelling fund and firm performance.
Operational function forecasts
Specifically within the industry, Alpha FMC has predicted the following for each operational function:
1. Refocus from tactical to strategic cost control
CFOs will increasingly refocus their attention away from tactical cost control towards structural drivers of cost within their business.
“Closing unprofitable products, rethinking location footprints, building scale and accelerating the outsourcing of non-core capabilities will all be avenues CFOs look at closely this year,” said the report.
2. Data initiatives
This year, CFOs will demand internal data initiatives to help with untangling stranded costs and allocate profitability to lines of business.
“Implementing fit-for-purpose, reliable and transparent cost allocation data will become a must. Investing to scale areas of strategic growth,” Alpha FMC said.
3. Post-Covid scrutinisation of portfolios
CFOs will actively scrutinise portfolio investments that no longer meet the firm’s post-Covid strategy. As such, those investments will be paused and budgets will be repurposed.
1. Firm growth
Alpha FMC expects COOs this year to be focused on enhancing operations to deliver the CEO’s strategic goals of growth and profitability.
2. Controlling and mitigating global operational risk
According to the report, COOs will be focusing on end-to-end operating model simplification and digitisation to meet immediate needs, as well as laying the foundations for the future, with increasingly diverse asset classes and global coverage requirements.
3. Talent management
COOs are expected to manage the challenge of differing views by the team on post-Covid working styles, as well as pressure this places on teams and technology. This includes evolving the firm’s talent management and retention strategy while likely incorporating hybrid working styles and systems.
1. Cloud migration & Architecture-as-a-Service platforms
Alpha FMC expects CTOs to focus on deploying new technologies and architectures as well as designing the optimal organisation to support these areas.
2. Accelerating tech transformation and digitisation strategy
CTOs will likely accelerate moves to the Cloud, enabling movement to marketplace and ecosystem-based architectures.
“We also see a continued focus on cybersecurity and supporting new platforms as firms move away from hyper customisation,” said the report.
3. Platform simplification
This year, CTOs will look to simplify their technology stacks. According to the report, “This might include rationalizing platforms and moving away from hyper customisation. Providing low code/no code tools to more efficiently augment investment and distribution capabilities.”
Chief Data Officer (CDOs)
1. Data insights and innovation
CDOs are expected to refocus their data insights and innovation as they come under pressure to show an ROI on data investment.
“This could be materialised by reducing market data costs, supporting simplification of the overall architecture/operating model, embedding ESG/RI data across the enterprise, and driving consistency across public and private markets,” said Alpha FMC.
2. Cloud challenges
CDOs will also be responsible for navigating the opportunities and challenges that emerge from using Cloud solutions, data marketplaces and ecosystems. The report predicts CDOs will be focused on moving to a model that integrates all internal and external partners.
3. Data governance
According to the report, CDOs will continue to focus on foundational data topics around data governance, data mastering and data quality KPIs/SLAs.
Head of compliance
1. Manage compliance risk
Compliance heads will need to demonstrate to regulators how the function is set up to perform well, as expectations from asset managers and investors increase.
2. Business growth and expansion
According to the report, compliance teams will need to be ready to handle business growth and digital transformation across new jurisdictions, an expanding product range including private assets and ESG.
3. Culture and accountability
Alpha FMC predicts that this year, compliance heads will need to ensure people have the correct skills, processes and technology to provide quality advice and deliver effective monitoring programmes.
This might involve hiring and developing compliance talent with knowledge of the business, global regulations and digital transformation.
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