Private Credit Administration: Do You Have the Right Balance of Talent, Expertise, and Technology?

Private Credit Administration: Do You Have the Right Balance of Talent, Expertise, and Technology?

Private credit is booming. Preqin expects private debt to reach an all-time high of $2.3 trillion in assets under management at the end of 2027. CSC’s analysis of Preqin’s database identified 4,809 private credit funds at the end of June 2023, a 91% increase since 2018.

This astonishing growth is expected to continue as more investors move into the alternative asset space. However, the private credit sector is still evolving, and its operating model and effective best practices are still developing. This growing sector can prove complex and resource intensive, making choosing the right talent and technology critical to facilitate important business insights and reduce the administrative load.

Many firms are expanding into private debt funds or adding to their existing debt portfolios, but not all have the operational expertise they need to administer these complex strategies. According to a report by the Alternative Investment Management Association (AIMA), 90% of private credit managers say they are experiencing operational issues with loan agency and administration.

Private fund chief financial officers, chief operating officers, and investors are keenly aware of the primary challenges in private credit. Top of mind is a shortage of talent and relatively high staff turnover, which negatively impacts the effective management of loan lifecycles.

They also face challenges with private credit’s operational complexity. Managers are trying to scale up while dealing with manual processes, spreadsheets, and hundreds of pages of documentation and legal agreements.

Loan lifecycle challenges

The challenge for private credit is the lifecycle of the loan, which is directly linked to the talent shortage. Loans are long and complex. If you’re having high staff turnover, it’s difficult to keep track of those data sets that change over a long period of time.

Currently, in-house teams struggle to provide the necessary daily digest of data that managers need. Different teams within the same fund administration service may have varying abilities.

In private credit, the cadence of activity around the loan is far more frequent and this makes it even more vital that administrators understand the technology tools and anticipate what will be needed during the life cycle of that loan. In addition, each loan or asset has a life cycle which requires its own specific variances.

The role of technology in data mining

Data mining is becoming crucial to business insights and to delivering information investors demand. It’s now common for data sets to be needed within 24 hours, and for daily reports to be provided to investors.

Demands for transparency around data are increasing, creating challenges in responding to requests, where data originates, and how to present it. Managers need to be able to access and assemble very specific data in a bespoke format on a regular basis.

While technology can deliver, it requires specialist knowledge of systems to pull out what is needed, especially if different systems cannot communicate effectively.

According to the AIMA report, close to half of managers with debt funds (45%) cite the limitations of their existing technology to track loans as an operational challenge. In fact, technology is one of the top three challenges for this fund type.

The data needs of private credit

Private credit covers a variety of industries, from aircraft leasing to litigation finance, direct loans, and supply-chain finance. While diversification yields attractive returns, it also brings a host of compliance requirements.

These are complex assets. Everything is bespoke, with no standardization of deals, reporting, data, or cash flow. In terms of how these transactions are structured, there is no one-size-fits-all in the private credit spectrum. This can present considerable administrative hurdles for private credit managers.

What does the future hold?

The private credit space is in the early phase of maturing its operating model. This means that the sector is still defining effective best practices and managers are evolving their approach. There are a variety of options, and this is where strategic outsourcing can help.

For private credit fund managers, their system and technology choice may be sound, but one system will not meet all their needs. Managers seek a solution which will help them manage the daily cycle of reporting and granularity of data that they need to analyze and format.

A good outsourcing partner can leverage other platforms as an extension of your organization and provide the flexibility in operations and standards in reporting that are required.

How we can help

The variety of data required to run a successful strategy, meet investors’ demands and comply with regulatory requirements is overwhelming. At the same time, the diversity of assets makes it difficult to standardize reporting and make the best use of the data collected.

CSC has professional, specialized teams for this purpose, who can meet global and diverse requirements, supported by bespoke automation systems that allow a fast and monitored process. This means we can tailor the presentation of the enormous amount of data to meet strict regulatory and investors’ requirements with customized software solutions. From our capital markets specialists that provide bespoke loan agency services to our fund solutions experts that administer credit funds, CSC can manage the end-to-end operations of credit funds anywhere in the world.

​​​​​​Why CSC

CSC is the trusted partner of choice for more than 90% of the Fortune 500®, more than 90% of the 100 Best Global Brands®, and more than 70% of the PEI 300. We are the world’s leading provider of global business administration and compliance solutions, specialized administration services to alternative asset managers across a range of fund strategies, transactions involving capital markets participants in both public and private markets, domain name system management and digital brand and fraud protection, and corporate tax software solutions. Founded in 1899 and headquartered in Wilmington, Delaware, USA, CSC prides itself on being privately held and professionally managed for more than 120 years. CSC has office locations and capabilities in more than 140 jurisdictions across Europe, the Americas, Asia Pacific, and the Middle East. We are a global company capable of doing business wherever our clients are—and we accomplish that by employing experts in every business we serve. We are the business behind business®. Learn more at cscgfm.com