By Tamas Mark, Global Head of Real Assets
Private market CFOs are dealing with a tough landscape, characterised by political instability, fundraising challenges, shifting global regulations and a reduced talent pool. Against this backdrop, operational agility has become a cornerstone of resilience and growth.
Where a challenging macroeconomic environment and growing demands from LPs collide, how do CFOs adapt to continue driving value? In this article, using key insights from our recent CFO survey report, we examine the ways in which CFOs are re-evaluating their operating models and where there may be untapped potential.
Evolving strategies for value creation
Our global survey of private market CFOs found that fund financing (42%), cost optimisation (40%) and digital transformation including AI (38%) are the top three strategies being prioritised to create value amid current market conditions. These figures reflect the growing pressure to do more with less, while delivering predictable returns.
The rising use of fund financing, in particular, has important operational implications as it increases the leverage of the portfolio. Because it introduces more complexity and liquidity needs, a robust treasury management system (TMS) is therefore a must. Fund-level borrowing can also create new challenges around regulatory scrutiny, and if the right system is not in place, the risks can fall directly on the CFO.
A missed opportunity in predictive analytics
Interestingly, several value creation levers were revealed by our survey to be less widely adopted – including changing the ownership structure (used by 2% over 12 months), product development tailored to emerging markets (20%), talent acquisition (20%) and ESG initiatives (20%). But perhaps the most underutilised area is data – and more specifically, AI-based predictive analytics.
Justin Partington, our Global Head of Fund and Asset Managers, has observed a sizeable and largely untapped opportunity in the private markets to use predictive analytics to forecast performance and improve decision-making. “Predictive analytics is already widely used in other industries – such as in transport, predicting toll road usage based on traffic patterns, or projecting future vacancy rates of a building in real estate,” he comments. “Armed with this data, decision-makers can then go away and make essential changes to optimise revenue and improve performance. In private markets, predictive analytics is vastly underused but will be a critical tool to help our clients add value and make more informed decisions in future.”
The same principles can also be applied to internal operations. Our survey results suggest that CFOs could be making better use of data to optimise hiring, manage cashflow and shape the workforce.
Justin adds: “Instead of looking back at last quarter’s performance, boards should be looking forward, and asking the hard questions: what’s the predicted performance of this company six to 12 months from now? What decisions need to be made today to plug future gaps? To have informed answers to these questions, CFOs need to ensure their teams can collect and analyse this data.”
Retailisation – opportunity versus readiness
One of the clearest opportunities identified in the survey is retailisation, with 65% of respondents describing it as a ‘significant growth opportunity’. However, only 51% said they’re actively transforming operations to target retail investors.
While the potential is widely accepted in the industry, scaling this model can come hand-in-hand with deep operational challenges, which may explain the apparent gap. There’s a huge market for retailisation, but in practice, it can come with liquidity and risk management complications. Retail investors tend to demand greater transparency, higher-frequency reporting and more accessible digital experiences. These requirements can reduce returns, particularly if firms need to keep excess cash available to meet redemptions.
There are also significant variations in market readiness between key regions. Neil Synnott, our Chief Commercial Officer for Asia, observed that, in Europe, structures like the European Long-Term Investment Fund (ELTIF) have created a regulatory pathway for retail participation, but an equivalent isn’t available in Asia yet. “Tokenisation of funds may help close that gap in the future,” Neil says, “but Asia will likely be later to the party in terms of widespread retailisation. There are stronger protections for individual investors here, and exchange-traded funds (ETFs) continue to dominate the retail landscape. We’re probably two to three years away from seeing real momentum in retailisation across Asia.”
Growing LP demands
CFOs have long been facing intensifying pressure from LPs for transparency. Our survey data echoes this trend, with more than half (55%) of respondents reporting that meeting LPs’ demands for transparency has required substantial operational adjustments in the past 12 months. While this is a perennial problem for CFOs, over half citing ‘substantial’ adjustments within the past year suggests the reporting burden is continuing to grow.
Another 54% of those surveyed said that increased side letters and demands from LPs are also intensifying the admin burden in their role as CFO, while 53% said bespoke reporting needed by LPs is pushing up their administrative costs.
According to Elise Gray, our Head of CFO Support Services in the U.S., these challenges are now a daily part of CFO life in North America – but the solution lies in smarter technology. “Dashboards can help GPs to see what’s happening in real time, rather than having to email various different people to get the information they need. Much of this data is already tagged in the day-to-day bookkeeping, and technology can help surface it in a way that satisfies LPs and saves time,” notes Elise.
At IQ-EQ, we’re investing in our own tech stack to address this need – not only to help our clients reduce fees or workload, but to enable them to scale and attract bigger tickets from investors by becoming more marketable. Being able to standardise unstructured data, bringing together financial and non-financial information into a single source of truth, and present this insight to LPs in an easily digestible way is a real differentiator.
Regulatory initiatives, such as the Institutional Limited Partners Association (ILPA) reporting standards, are further driving change in this space. Neil observes: “Firms have had to build new tools to meet heightened reporting expectations. Investment committees are increasingly asking for timely data. Relying on quarterly reports is not enough anymore; real-time access is becoming the norm.”
Turning turbulence into tangible value
CFOs’ focus is shifting from short-term cost management to long-term value creation – anchored by new streams like retailisation, AI and predictive analytics.
However, all of this must be underpinned by operational transformation. Data, technology platforms and cross-functional collaboration are critical to meet rising LP expectations for transparency. As Elise summarises, “The firms that win in this market will be those that treat data not as an administrative task, but as the engine of their future growth.”
Want further insight into the challenges facing private market CFOs and how they’re pivoting their strategies to suit? Read our full CFO survey report.
