The Tech’s Factor 2023: The digital (r)evolution in private markets

Report 29 June

The Tech’s Factor 2023: The digital (r)evolution in private markets

100 US-based senior executives from middle-market boutique funds and asset managers on digitalization of the private markets

Private equity and other alternative asset management firms are experiencing a sea of change as digitalization continues to disrupt traditional business models and transform the way that firms operate for the better. With the rise of fintech and increasing pressure from clients to adopt new technologies, firms must fully embrace digitalization to remain competitive and relevant. With its configurable Software-as-a-Service (SaaS) fundraising and investor management platform, Bite Stream, Bite Investments is enabling its clients to achieve this transformation by compliantly streamlining and scaling the distribution of private markets investment products in a simple, secure, and efficient way.

In this report, we examine the impact of digitalization on the industry and our survey findings offer a unique perspective on the current state of play. Our research confirms that the digital revolution is having a direct, positive impact on profits and that keeping ahead of the curve in terms of technological capabilities is now a top priority for most organizations.

The findings also show that firms of all sizes are pursuing digitalization for very diverse reasons, including enhanced data access, meeting rising client demands, and improving investor retention. However, the divide between larger and smaller industry players found in our last report continues, suggesting there is still an opening for smaller firms to get ahead of their direct competition, one that has yet to be fully embraced.

Naturally, there are challenges to overcome. Our report finds that integrating new systems is a primary concern. With so many benefits on offer, it is crucial that firms can overcome these hurdles to maximize the impact of digitalization on their operations. This review of progress made to date and future intentions should serve as a roadmap for navigating the increasingly digital alternative asset management landscape as the industry continues to unlock the full potential of technology.

Highlights include:

  • Digitalization is making a difference. 79% of respondents overall agree that digitalization has had a direct, positive impact on their organization’s profit.

  • Clear lines of communication are fundamental. More than half of firms (55%) across AUM sizes say that client communication centres are among the top five most important areas of digitalization within their organizations to build long-term and successful relationships with their clients.

  • Digital expectations versus realities. Digital integration is the top challenge identified by respondents from firms of all sizes (between 58% and 68%) due to their adoption of new technologies in the past two years. In our previous survey, 48% of respondents overall cited integrating new systems as the top challenge, but this has now climbed to 62% overall. To prevent these challenges, firms must choose the right outsourcing partners and tools.

  • Investments in digitalization are increasing on all fronts. To improve profitability and stay ahead of the competition, firms expect to invest more in digitalization. Nearly a quarter (24%) of those representing larger firms say they expect their investment to increase by 25% to 50% in the next two years, while 40% see an increase of up to 25%. Smaller firms are generally more conservative in their digitalization investment plans. 31% of respondents from these firms expect the level of investment in digitalization to stay roughly the same as it is now, and 30% anticipate an increase of less than 25% over the next two years.

  • Finding the perfect third-party partner. Outsourcing investor onboarding, relationship management, and communication to a specialist third-party software service provider is now the rule rather than the exception. As much as 88% of firms now have arrangements in place covering these activities, up from 66% in our previous survey.

The report is also available to download from Bite Investments' website.

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