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Alternative investment fund managers are growing more reliant on technology. To compete, many have specifically built out processes and software to streamline their operations and increase efficiency. With that said, the pace of change is rapid and many managers are still struggling with a variety of tech-related issues.
Here we list some of the most common challenges we see today.
Data Overload
There is often a huge amount of data available to all stakeholders within an alternative investment company, such as investors, employees and clients. This can be challenging to manage and to make use of because it can become overwhelming over time.
As a result, specific data-related challenges can arise, including a lack of clarity around where data is stored, how it’s formatted, and who has access to it. Furthermore, fund managers may struggle to collect data from their various operational systems in a timely manner. All of these issues can result in a loss of productivity and even reputational damage.
What can be done?
To tackle data overload, alternative investment fund managers need to take a strategic approach and be selective about how they use data so as to avoid becoming overburdened by it.
Manual and Time-Consuming Processes
From onboarding new investors to accounting, many fund managers are still using manual processes that are time-consuming, inconsistent, and therefore costly. This can be particularly true in the fund setup and management stages, which are some of the most time-intensive periods of a fund’s lifecycle.
Lack of automation can leave fund managers in alternative investment funds prone to error and increases the likelihood of reputational risk. Both fund setup and management require a significant number of manual tasks.
For example, fund managers may have to manually distribute cash flows to investors, make fund size adjustments, and respond to investor redemptions. To make matters worse, these processes often involve jumping between different software systems and teams, which can create inefficiencies and bottlenecks.
What can be done?
To combat manual processes, fund managers must prioritise automation in their systems and processes as a means to streamline their operations.
Siloed Information
As data becomes increasingly fragmented, it can become difficult to make decisions that are relevant for the alternative investment company as a whole. This is known as siloed information and can be particularly problematic for organisations with larger scale, such as fund managers.
As previously discussed, fund managers may have a high level of data available to them, but it can be challenging to access and make sense of it all because it’s stored in different systems and locations. Siloed information can hinder timely decision making and coordination among fund managers. It can also limit team members’ ability to see the full picture and make informed recommendations.
What can be done?
Fund managers can avoid siloed information by establishing a centralised data repository and creating standardised ways of collecting and presenting data. This will encourage collaborative decision making, provide better insight into overall operations, and reduce the risk of errors.
Security and Integrity
With cybercrime remaining a top concern for organisations of all types, fund managers must prioritise cybersecurity. Cybersecurity breaches are not only costly to organisations, but they can also be extremely damaging in terms of reputational risk.
What can be done?
Fund managers can protect themselves against hackers and other threats by implementing appropriate solution architectures and ongoing investment in cybersecurity tools and technologies.
At a high level, fund managers can take these three steps to better protect themselves against cybercrime:
- Assess their current cybersecurity posture
- Implement appropriate solutions
- Prioritise ongoing investment in cybersecurity tools and technologies
Talent shortage
Managers face a variety of challenges in finding the talent they need to grow their teams, particularly in tech-related fields such as data science. The demand for skilled workers in alternative investment funds has increased competition for talent, making it more difficult for organisations to fill open positions.
What can be done?
Fund managers can combat this issue by investing in the growth and development of their existing team members so that they are equipped to take on more responsibility and lead the firm’s initiatives. A lack of tech talent can lead to operational inefficiencies and be a significant barrier to innovation.
In order to attract the talent they need, fund managers must have a clear vision for what their technology looks like, as well as a roadmap for how they will get there. This will allow them to create a compelling narrative that will appeal to potential employees.
Automation isn’t a silver bullet
Fund managers often turn to automation in order to improve both efficiency and accuracy. Although automation is a great tool for driving results, it’s important to keep in mind that it can’t replace human judgement. Fund managers must look for ways to introduce automation, but also ensure that humans remain involved in decision making to avoid a false sense of security.
With the rise of artificial intelligence, fund managers are turning to new technologies such as machine learning, natural language processing and neural networks. These technologies can help fund managers make smarter decisions, better understand their clients, and predict future outcomes.
Fund managers who have invested in automation have been able to focus more on their core business, reduce operational costs, and become more innovative as a result.
Lack of innovation culture
Fund managers face tremendous pressure to perform, which may cause them to prioritise short-term results over long-term growth. As a result, fund managers may miss opportunities to invest in innovation and tech-driven solutions that can help them in the future.
Conclusion
As the digital era continues to unfold, it’s becoming increasingly important for fund managers to adopt a digital mindset and adopt technology and new ways of working. Fund managers who can successfully navigate this change will be better positioned to grow their businesses, attract new investment, and provide better service to clients.
Fund managers can overcome these challenges by prioritising strategic investments in technology, developing a culture of innovation, and making bold moves to adopt new technology. With the right approach, fund managers can position themselves to be more agile and better equipped to thrive in the digital era.
