Outsourcing has become a key strategy for fund managers in private markets to increase operational efficiency and reduce costs. As fund operations grow more complex, the adoption of third-party services continues to rise.
Our latest research report, Leading the shift: Transforming private markets in a retail-driven landscape, surveyed 117 senior executives, including C-suite leaders and portfolio directors, from firms managing $1 billion to over $50 billion in assets. The findings provide a comprehensive view of private market trends and the increasing role of outsourcing.
The research reveals that 76% of firms have used outsourcing services in the past three years, and 77% are open to using them in the future.
The benefits of outsourcing
- Fund managers cite numerous advantages of outsourcing: Time savings (71%) and cost efficiency (70%) are the most significant drivers
- Scalability and flexibility appeal to 54% of respondents, enabling firms to expand or adapt operations seamlessly
- Access to expertise (47%) and advanced technology (31%) allows managers to stay competitive without substantial internal investments
- Risk management (37%) further underscores the value of outsourcing in ensuring operational robustness
These benefits collectively allow fund managers to focus on core business functions, such as strategic decision-making and client engagement.
Addressing outsourcing concerns
While outsourcing offers substantial benefits, some challenges persist. Data security tops the list, with over half of respondents citing concerns about potential breaches and loss of control.
Other apprehensions include:
- Higher costs compared to in-house solutions
- Communication and collaboration difficulties
- Limited customisation options for specific needs
To address these concerns, firms are investing heavily in secure infrastructure and fostering transparency with service providers. We, for example, launched the Apex Tempo platform, a secure and collaborative tool designed to mitigate risks and improve efficiency in stakeholder communication.
The rise of lift-outs
A growing trend in outsourcing is the use of lift-out strategies, where operational functions and personnel are transferred to a third-party provider. This approach ensures a smooth transition while retaining critical industry expertise.
Our findings reveal that 65% of firms have implemented lift-out strategies in the past three years. The primary motivations include:
- Cost reduction (58%) and access to specialised talent (52%)
- Advanced technology (50%) and risk management (43%)
Lift-out strategies help fund managers reduce overheads, improve efficiency, and maintain continuity while leveraging external expertise.
Outsourcing: a strategic imperative
As private markets grow in scale and complexity, outsourcing is proving to be a vital tool for maintaining operational excellence. By embracing third-party services, fund managers can streamline their operations, reduce costs, and focus on delivering value to investors.
Download our latest research report for more industry insights!
To learn more about outsourcing trends and their impact on private markets, download our full Global Custodian research report, Leading the shift: Transforming private markets in a retail-driven landscape.
