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Asset Owners’ Private Markets Dilemma

29 June 2022
By Shar Kassam | Head of Nasdaq Asset Owner Solutions

Demand for private markets continues to grow

As institutional asset owners seek to maximize portfolio returns, the private markets continue to be a top destination for new allocations. According to data from Nasdaq eVestment, public pension plan allocators reported over $155 billion in commitments to private equity and private debt funds in 2021, a 12% increase from 2020. In 2022, allocators have poured nearly $50 billion into these private funds through April.

Public Pension Plan Reported Commitments to Private Equity & Private Debt

Source: Nasdaq eVestment, data as of April 30, 2022

Private Equity and Private Debt Commitments

Private debt specifically has been an area of focus for institutional investors in the wake of market dislocations caused by the pandemic. Many asset owners are adjusting portfolio allocation targets to make room in their annual pacing plans for commitments to the asset class. As of April 30, 2022, 60 public plans were under allocated against their private debt target allocations, representing $14.1 billion in potential commitments.

But as investors increase their allocations to private markets funds to meet return targets, in turn, more operational challenges and risks are added that they need to be prepared for.

The challenges of private markets investing and monitoring only increasing

While private funds, and their investors, have enjoyed the fruits of a bull market, the recent spike in inflation and increasing interest rates are creating market volatility, with even more consideration required in portfolio construction, cash flow and liquidity forecasting, and new commitment pacing and due diligence. Asset owners need accurate and timely data across their entire portfolio to do this – something they struggle to achieve due to the characteristics of the private markets.

Once a commitment to a private fund is made, investors face the complex challenge of collecting data on that commitment and integrating it into their existing systems to create a complete portfolio view.

The private markets data dilemma

Part of the challenge for asset owners here is simply a logistical one: getting access to private markets portfolio data in a timely manner and a functional format that is consistent with the wider portfolio. Regardless of the “private” nature of private markets funds, they are still just one part of an asset owner’s broader portfolio and investors need visibility into the underlying assets of their private markets funds to have a holistic view of their portfolio to understand their level of risk.

Asset owners need to gather data such as daily cash flow transactions, quarterly investor and fund reporting, and portfolio company performance and valuation metrics. In many cases institutional investors simply do not have the manpower to collect, scrub, and maintain this data.

Relying on external parties like custodians is an imperfect solution, as data and calculations will be based in general ledger accounting results rather than true point in time data points that are crucial for accurate exposure, performance, and risk analysis.

Legacy technology platforms are similarly limited in their effectiveness. Many asset owners use multiple “point solution” technology platforms that specialize in a single asset class. As a result, these legacy systems assume that the individual investment attributes, timing, and data elements of each investment are the same for all asset classes. This makes them poor tools for providing accurate and actionable visibility across an asset owner’s full portfolio.

Without technology that provides an integrated total portfolio view, asset owners are left with the time-consuming task of building bespoke spreadsheet-based models to get the answers they need, or worse, they forgo this necessary analysis.

Meeting your portfolio needs with Nasdaq Asset Owner Solutions

Nasdaq is helping institutional investors overcome the operational challenges of managing and growing a private markets portfolio with a true multi-asset class portfolio analytics solution, Solovis.

As part of the Nasdaq Asset Owner Solutions ecosystem, Solovis uses a flexible data model can ingest and handle performance metrics and analytics across all asset classes. You get the flexibility of looking at your total portfolio in one place, with the deeper, purpose-built analysis you need to plan your private markets program in an ever-evolving market: from performance and exposure analysis to commitment pacing planning, and cash flow and liquidity modelling.

Solovis also ensures you get the timely and clean data you need for decision-making, without expending internal valuable resources on manual data work, through our talented and experienced analyst services team.

Asset owners are evolving their portfolios to meet their investment objectives. It’s time their portfolio management tools evolved, too.


Learn more about Nasdaq Asset Owner Solutions:

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