While the prevalence of private credit and debt continues to grow among investors, so do the operational complexities for managing these investments. To add to the intricacy, institutional investors have rigorous due diligence requirements with a considerable focus on data transparency. Firms that can demonstrate a robust operational infrastructure will be more attractive to these investors.
The importance of an internal book of records
In a recent Hedgeweek Special Report, Customising the Portfolio Accounting Experience Relies on Superior Technology, SS&C Advent's Nicholas Nolan and Aani Nerlekar discuss the operational complexities of managing private credit and debt assets. According to Nerlekar, "Investors do demand more of their managers, in terms of transparency around how these funds are managed and accounted for. There is more expectation from investors for look-through reporting and determining how much of each loan in the portfolio is being funded by an individual investor.” Managers employing private credit strategies, with complex loan terms, require direct access to accurate, real-time data that provides transparency to investors, as well as provides a clear picture of whether the returns generated are meeting their expectations.
Furthermore, an additional challenge in managing private loans is tracking the various different types of loans with as many different fee and payment schedules. When relying on legacy IT systems, this is often a manual process, and therefore prone to human error. For firms that maintain an internal book of record, they are able to provide oversight and transparency. This gives them a foundation that shows operational flexibility and independence; both key components in mitigating a fund's risk.
Streamlining operational processes
Given the multitude of private loan investment options available, Nolan details "One of the trends we've definitely seen among credit managers is that, while some portion of portfolios is comprised of syndicated loans, many of them are originating their own debt and coming up with their own bespoke terms for rules on cash flows." Fund managers must be able to show interest accrued, as well as demonstrate that interest has been properly allocated to each entity. The right technology system gives a firm autonomy and full control over all its data, with streamlined and efficient processes, allowing firms to create and deliver reports without waiting for the books to close.
Solutions for managing private credit
As private credit continues to expand, firms will need to employ solutions and workflows that help manage the operational complexities. With greater accuracy and transparency, managers can not only provide reassurance to their investors, but also have more time to focus on their core competencies. SS&C Advent Geneva®, an award-winning investor and portfolio accounting solution, gives fund managers the flexibility and full support to manage the operational complexities and investor reporting.
For more on the technology required for managing private credit, download Hedgeweek’s Special Report, Customising the Portfolio Accounting Experience Relies on Superior Technology. Are you interested in hearing more about Geneva? Contact us, or request a demo today.