Whilst the outsourcing model is very familiar to the European market, it is still comparatively new to the US market where there is still some way to go before many GPs feel comfortable relinquishing the control and direct oversight they have over their administration.
However, on both sides of the Atlantic, we are now seeing a greater expectation that the fund manager focuses on its core areas of expertise rather than getting distracted by ancillary functions.
In addition, increased scrutiny by regulators, with US regulators warning private equity managers to expect more fines and enforcement actions for overcharging investors, is stretching in-house compliance teams and causing GPs to reassess.
In December 2021, Global Infrastructure Management LLC was ordered to pay $4.5m to settle charges that it failed to properly offset management fees and for making misleading statements about the fees and expenses it charged.
The fund manager needs to focus on its client relationships at one end and on maximising the value of its assets at the other. The challenge is that in between those two pillars, there is an awful lot of hard work that needs to be done.