Investors are concerned about the growth rate.
This phenomenon is true not only in the U.S., but also in Europe and China. Concern stems from trade, as well as a shift in sentiments in the U.S. around the Federal Reserve. Investors need financial market stability and a steady growth curve.
Market liquidity is more vulnerable than it’s been in the past.
Much of this vulnerability is regulatory driven. Investors looking to raise cash are relying less on the market and doing it on their own terms – either beforehand or by matching funds.
Deficits are growing.
Deficits in the U.S. will likely continue to rise, and the rise will likely be substantial. If so, the government will need to increase funding to accommodate, which could lead to more Treasury Bill (T-Bill) and treasury issuance in the future.
Investors want unique, customized products and strategies.
Since 2008, we’ve seen a consistent trend toward customized products and strategies across different buckets and custom vehicles. Investment strategies continue to transition away from traditional open- and closed-end structures toward more hybrid-type fund structures. Investors are looking for the flexibility and transparency of many strategies in a single entity. This has been especially true within the separately-managed account (SMA) and fund-of-one space.
Transaction volumes are growing.
A renewed interest in the search for yield price has opened the floodgates to marketplace lending, peer-to-peer lending, direct lending, middle market loan buffets and other transaction-heavy segments. This surge in volumes places increased stress on providers, as they now have to take in larger quantities of data (in a variety of structures and formats), normalize it and return it to the client within tight timeframes.
Hedge fund-type strategies are being applied to ‘40 Act funds and retail products.
As the retail environment continues to seek out new strategies, more investors are using hedge fund strategies in ‘40 Act funds. This trend has been occurring for several years, and it’s continuing to increase. The retail-type demands of investment managers put strains on every administrator in that space. Accommodating the necessary transparency reporting requires as much workflow automation as possible.
CLO growth and the switch from LIBOR demand a future-oriented outlook.
The collateralized loan obligation (CLO) market is blooming, and it’s an asset class investors remain in for a long-term period. However, as the benchmark interest rate transitions from LIBOR to SIBOR by 2022, providers must assess what clients need today, but also what they’ll need down the road. Setting up new systems and infrastructure on a large scale takes years of planning, preparation and testing. The shift creates a greater need for cooperation, partnering and data integration with service providers.
Private debt continues to grow.
Many experts predict the private debt market could reach $1.4 trillion by 2023. The trend is producing more launches of public- and private-fund BDCs, hybrid funds and private equity funds. And this, in turn, increases demand for services around complex credit portfolios, especially in the following areas: NAV issuance, financial statement production, investors’ services, statementing and additional transparency and reporting work.
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