Why a Flexible Infrastructure Is Mandatory for Private Market Alternative Asset Classes

Investors are increasingly diversifying portfolios with private market assets to pursue higher returns. As a result, limited partners (LPs) are searching for general partners (GPs) who possess experience, transparency, and strong governance.

This dynamic exists because private market investments, including alternative asset classes, offer unique opportunities. Investors are allocating larger portions of their assets to private markets, such as private credit, private equity, opportunistic credit, real estate funds, infrastructure funds, and collateralized loan obligations (CLOs). Each of these alternative asset classes also brings unique challenges, namely advanced portfolio management and portfolio monitoring.

To effectively navigate the complexities of these asset classes within a portfolio, portfolio managers need to choose investment management software with a flexible infrastructure that streamlines processes, facilitates efficient decision-making, and caters to the unique needs of these asset classes. In this article, we will explore how the IVP for Private Funds platform provides the flexibility required to support multiple private market strategies.

Let’s delve into the key factors to consider when investing in each private market asset class.

Private Credit: Private credit investments involve lending capital to non-public companies or borrowers without access to traditional bank financing. Challenges in this asset class include underwriting credit risk, managing diverse loan portfolios, and monitoring borrower performance and financial covenants. For this asset class, a flexible infrastructure needs to incorporate robust risk management and compliance frameworks to assess creditworthiness, perform due diligence, and monitor loan portfolios effectively. IVP Solutions for Credit Managers support unique workflows for various credit market demands, increasing efficiency and accuracy. With built-in integrations, the solutions help funds avoid the discontinuities and redundancies that arise from multiple overlapping technology deployments.

Collateralized Loan Obligations (CLOs): CLOs are financial products that involve bundling pools of loans and selling them to investors. This asset class presents various challenges, such as dealing with intricate deal structures, monitoring loan performance, and adhering to regulatory requirements. A flexible infrastructure is essential for addressing these challenges. It allows streamlined deal structuring, accurate cash flow modeling, and extensive scenario analysis. It should also integrate robust risk management frameworks to evaluate credit risk, closely monitor loan performance, and ensure adherence to regulatory guidelines. IVP Solutions for CLO Managers have been specifically designed to automate these tasks, including allocations, rebalancing, and computationally intensive processes. This not only enhances efficiency but also facilitates scalability while maintaining strict compliance with indentures.

Opportunistic Credit: Opportunistic credit investments involve investing in distressed debt, special situations, or undervalued securities to generate higher returns. One challenge in this asset class is efficiently sourcing and evaluating investment opportunities. Asset managers pursuing opportunistic credit strategies capitalize on unique credit market situations. A flexible infrastructure incorporates comprehensive data management capabilities to collect and analyze financial data, credit metrics, and market information. Opportunistic credit deals often involve complex structures and data sets, making conventional manual spreadsheets impractical. IVP Solutions for Opportunistic Credit are specifically designed to manage bespoke deals with complex structures and data sets as well as streamline operational tasks, allowing funds to free up valuable resources and focus on emergent opportunities.

Real Estate Funds: Real estate funds invest in various property types, including commercial, residential, and industrial properties. Challenges in this asset class include property valuation, market analysis, and property management. A flexible infrastructure incorporates robust data management capabilities to collect and analyze property data, market trends, and financial metrics. Advanced deal analytics and reporting tools can aid in property valuation, market forecasting, and risk assessment. IVP Solutions for Real Estate Funds let funds track analysts’ thesis evolution for each deal, as well as unweighted IRR, present IRR, and adjusted IRR, all in the same integrated data and reporting hub.

Infrastructure Funds: Infrastructure funds invest in projects such as transportation, energy, utilities, and social infrastructure. Challenges include identifying investment opportunities, conducting due diligence, and managing operational complexities. A flexible infrastructure enables efficient data collection, financial metrics analysis, project viability assessment, and regulatory considerations. Advanced deal analytics tools can optimize asset allocation. Infrastructure projects also involve longer horizons, more counterparties, and varied financing structures for each phase. IVP Solutions for Infrastructure Funds automatically tracks these components, ensuring a cohesive strategy as real-world conditions change.

Private Equity: Private equity investments involve acquiring equity stakes in privately held companies for long-term capital appreciation. The intricacies of the private equity space often lead to workflow fragmentation between the front and back office, reducing margins and congesting deal flow. Other challenges in private equity include deal sourcing, due diligence, and post-investment portfolio management. A flexible infrastructure enables seamless collaboration among investment teams, advisors, and clients, streamlining the deal evaluation and execution processes. Robust data management systems can assist in collecting and analyzing financial statements, market trends, and industry insights to support informed investment decisions. IVP Solutions for Private Equity provides an integrated data hub and reporting solution that aligns tasks and reduces workload, automating workflows, reducing errors, and simplifying reporting.

Overall, effectively managing a diversified mix of private market alternative asset classes — one that includes opportunistic credit, private equity, private credit, infrastructure funds, real estate funds, and CLOs — requires a flexible operational infrastructure. This infrastructure necessitates a centralized data layer, streamlined workflows, and seamless system integration to ensure operational efficiency and agility.

IVP for Private Funds meets all of these needs by seamlessly integrating with IVP Security and Reference Master, IVP Data Warehouse, and IVP Order Management System for extensive workflow management that enhances data consistency and collaboration. With our IVP for Private Funds Platform—including expert managed services—funds can scale up rapidly, increase enterprise efficiency, and achieve the transparency investors demand.