Fund managers can unlock the full value of big data by rethinking how the middle office handles it, says Thomas Erichsen of TMF Group Capital Markets Services.
Private equity funds must make better use of the wealth of data they have access to. The sector is around 10 years behind hedge funds in setting up robust middle office functions that create usable data to enhance performance.
The middle office - a compliance and risk management hub - has been in the shadow of the sales-focused front office. However, as more and more data passes through it, the demands placed on the middle office are greater than ever and deserve more attention.
There are more regulatory requirements, including the new Securitisation Regulation and associated criteria for designating certain securitisations as simple, transparent and standardised (STS). There are myriad measures needed for Environmental, Social and Governance (ESG) reporting, daily performance returns, enterprise risk and new client reporting. The middle office must support an increasingly diverse range of asset classes, such as private equity secondaries, which are now generally recognised as a proper asset class.
This increasing flow of unstructured big data, in tandem with heightened investor demand for data governance and quality, is a largely untapped source of value that can be mined to drive operational efficiency and inform better decision making.
At the recent British Private Equity and Venture Capital Association (BVCA) Summit, I moderated a roundtable discussion that examined changing fund manager behaviours. It seems that many are unable to take advantage of big data because of time constraints and other pressures and because their data is not properly organised, archived...