Since the onset of the pandemic, hiring and retaining top talent has been challenging across most industries, and the asset management sector is no exception. In a 2020 survey of private equity firms, 82% said they had challenges retaining talent, and 40% of these employees joined a competitor during this time.
To remain competitive and meet the demands of Limited Partners (LPs), regulators, and ESG reporting, General Partners (GPs) need to be creative in retaining their own talent and recognize that outsourcing core functions to skilled service providers can also be part of the solution. Limited Partners have woken up to the effects that attrition can have on their business, both on the investment team and in the back-office. As challenges with retaining top talent continue to plague the private equity industry, prudent GPs have begun outsourcing their middle and back-office functions and related services like ESG reporting and regulatory compliance to specialized fund administrators.
According to a PWC survey, 70% of European private equity firms and 30 – 40% of U.S. private equity firms outsource. This figure is on the rise. Outsourcing to reputable fund administrators allows GPs to focus on the core aspects of their business which add value to the franchise and rely on experts to attend to their specialized tasks.
Therefore, hiring the right talent at fund administration firms has never been more crucial. The need for experts with the right skill set continues to be in constant demand. Fund administrators have had to become more creative in creating an environment that appeals to the modern workforce to attract top talent. At Petra, that has meant hiring teams comprised of former in-house private equity back-office professionals and giving them the room to help build systems that work for the clients rather than imposing top-down solutions.
So, how has Petra tried to rise to the occasion to support GPs' needs?
Specialized services are becoming a powerful differentiator among fund administrators. Different asset classes, fund structures, and niche reporting requirements can differ substantially, requiring specialized expertise to service correctly. GPs are looking for experts, not labor. Petra's approach is to focus our recruiting efforts on hiring specialists, not generalists, as private equity firms continue to outsource.
Regulatory compliance is an area that more and more GPs are outsourcing. At Petra, we have focused our hiring on in-house lawyers and compliance consultants to develop and execute full-fledged compliance offerings.
ESG reporting is another area that fund administrators have hired more aggressively in the past five years. Former in-house ESG experts, attorneys, and consultants are now helping Petra build a comprehensive ESG offering that addresses both the GPs internal and portfolio company ESG goals.
Meeting new investor demands will require a combination of expertise, technology, processes, and procedures. General Partners realize that a proven robust technology platform is required to scale their operations. However, it is cost-prohibitive and inefficient for many private equity firms to hire specialists and invest in robust technology.
This is where Petra steps in. The very nature of our business requires that we invest in technology and create productive joint ventures with the technology providers to efficiently deliver reporting to GPs, LPs, regulators, and other third parties. Technology helps us scale our internal operations and reduce the risk of errors. However, technology is only as valuable as the people using it and the information that goes into it. At Petra, our view is that there are a set of simple tools which can produce top decile reporting for our clients. Adding additional bells and whistles may sound like a good idea, but it can be counterproductive if it is new or unproven or uses hours in the day to operate that a GP cannot spare.
What began in 2020 as a spate of post-pandemic turnover has quickly accelerated into a much larger phenomenon with no industry or sector spared. These challenges have persisted since then and have caused firms to become more creative in their strategies to attract and retain talent. The need for top talent has never been more critical to a fund administrator's success, including our own. The result for Petra has been a new focus on what we offer our employees and stronger company cultures.
Some of the benefits fund administrators have invested in include:
The industry shift is a win-win-win for GPs, LPs, and fund administrators. GPs are gaining teams of experts, technology, and enhanced reporting allowing them to focus on critical areas like portfolio management and investor relations. LPs benefit from access to Virtual Data Rooms, online reporting platforms, and increased focus from GPs. Fund administrators and their teams benefit from stronger cultures and experienced professionals in areas that offer young professionals career growth opportunities.
The fight for high-quality talent in the fund administration industry has never been fiercer. Finding the right people is necessary for the success of the fund administrator and private equity firms as demands from regulators and LPs increase. At Petra, we integrate the right people and processes into a reliable and competent structure to ease the administrative burden on GPs.
