Direct lending AUM has grown nearly tenfold in the past decade (Source) and is on track to hit $2.69 trillion AUM by 2026 (Source). Private debt portfolio management is incredibly complex, involving loan facilities, maturity, repayment, interest rates, collateral, covenants and more. Fund managers must also track compliance data, portfolio-level accounting and fund portfolio performance data for investor reporting.

Traditionally, operations in private debt investments relied on fragmented teams working through a painstakingly manual process of spreadsheet data entry which hindered funds seeking to optimize efficiency, scale up and gain a competitive edge. In fact, operational risk accounts for half of all failed private funds, and the rate is likely higher for private debt due to inherently higher risk (Source).

The outlook for private debt and direct lending appears bright; now it has become necessary for private debt managers and fund managers to overcome the operational challenges standing in the way of the opportunities the current market environment has to offer.

With a prevalent use of fragmented systems and spreadsheet-driven workflows, the private debt industry faces challenges related to:

  • Deal Evaluation Velocity: Without a proper deal lifecycle management system, the data capture process for screening and managing different types of deals can become very time consuming and labor intensive, especially in cases where different workflows and process checkpoints are required.
  • Pre-Trade Compliance: Due to an inherent lack of flexibility present in current offerings, it is difficult to track different compliance parameters that are set up as new funds launch. With this, the configuration of compliance rules and maintenance of checks are primarily done within spreadsheets, which become cumbersome and difficult to manage as data is obtained from multiple sources – leading to potential issues related to data quality management.
  • Scalability: The remote work environment has driven the need for more bandwidth and resources, creating a hurdle for many as the pressure to keep costs at a minimum remains.
  • Risk Management: Most internal risk management systems aren’t flexible and strong enough to handle new risk factors, perform impact/scenario analysis on deals and allow managers to focus on those with the highest risk.
  • Borrower Monitoring: With the number of deals continuing to increase, processes like expense allocation, cash management and forecasting become more complicated. Existing portfolio management tools have proven to be inadequate for handling this influx, especially for fund managers with a presence in multiple jurisdictions.

The IVP for Private Funds platform empowers private debt managers and fund managers to establish a single source of truth for all financials across the entire debt portfolio, including deal flow, projections, company financials, credit monitoring and portfolio management. With a single platform for private debt, lenders can replace fragmented data and manual processes with an integrated experience and automated workflows for term sheets, reporting and investor communications.

For more insight, watch IVP’s on-demand webinar, Automating Deal Management and Portfolio Monitoring for Private Debt, where subject matter experts provide an overview of these key challenges and detail how private debt / private credit funds can scale AUM by migrating critical workflows to a single, front-to-back platform backed by expert managed services.

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