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Pandemic ‘big resignation’ and remote working trends make private equity back office talent harder to find and costlier to recruit and retain

Outsourcing, a growing trend among private equity firms for several years, has reached a tipping point. We anticipate that the vast majority of private equity funds will outsource fund administration by the middle of the decade.

Even so, there is still a long way to go, even though the pieces to make it happen are already in place. In a world shaped by the pandemic experience, the increased operational efficiency promised by outsourcing will be hard to ignore.

Our forecast of back office outsourcing is based on several factors, one of which is the current job market.

The great resignation

In the United States, there are 3 million more jobs than there are people looking for work; more surprisingly, in the first ten months of 2021, U.S. workers handed in nearly 39 million resignations, according to the the Wall Street newspaper. The phrase ‘big resignation’ was coined to describe a talent shortage driven by a desire for change linked to Covid.

It won’t last forever and reality will bite sooner or later, but right now the biggest consequences are being felt in industries such as retail and hospitality.

But fund management is not immune. It is increasingly difficult to find qualified personnel in the accounting, tax and operational back-office and their hiring is more expensive.

We regularly hear of fund accountants receiving multiple offers with generous hiring bonuses, which is highly unusual before the pandemic.

This race for talent may level off, but it is unlikely to go away. According to one calculation, from Preqin, there were 3,968 private equity funds in the market in 2020, a five-year high. The competition for the right back office staff has never been so intense.

The remote workplace is here to stay

Add remote working and you have a perfect storm for the industry. A remote workplace makes hiring more difficult. It also makes it harder to retain the talents you already have.

Most companies’ onboarding, training and mentoring programs have been designed with physical presence in the office in mind. Corporate culture is harder to instill when employees work from home two, three or more days a week.

Anecdotally, we hear that managers need to spend more one-on-one time with remote staff than they did when everyone else was in the office, likely because the broader support networks out there. which we all relied on before the pandemic are less easy to reach on a Zoom call.

Is teleworking a temporary measure? It seems unlikely. Most consultants agree that working from home will become permanent to some extent, with an average of two days a week away from the office.

Operational efficiency: doing more with less

On top of all of this, now is not the perfect time for the industry to grapple with recruiting and retention challenges.

Sponsors (LPs) and regulators demand even more transparency, a position reinforced by the performance reporting stipulations of 2020 GIPS, ILPA 3.0 and others.

The complexity of modern funds, combined with these increased demands, drives investments in new technologies and employees with the skills to store, process and analyze the data they produce, efficiently and securely.

Arguably, nothing reflects this better than the upward ESG trend; Private equity funds must now collect and process a wide range of ESG data in order to comply with a bewildering array of global standards.

ESG requirements will only get more stringent. They are a great example of private equity forced to do more with less.

Back-office outsourcing can help

Outsourcing the administration of funds is a useful solution. Fund managers can offload time spent on recruiting challenges and save money on frequent technology upgrades.

Finding a quality partner is essential. Private equity managers need to be assured of the security and sensitivity of their internal data. The sharp increase in remote working during the pandemic has undoubtedly resulted in heightened security risks; but at the same time, this trend also began to build confidence in outsourcing services. While an internal fund accountant now works from home for half the week, the back office functions are in fact already partially outsourced. More and more managers are coming to the conclusion that working with a partner will allow them to focus on what they do best: investments.

The benefits of outsourcing fund administration

We believe that the current hyper-competitive job market, along with a permanent shift to hybrid work, is a case for outsourcing the administration of funds.

And while the job market may stabilize over time, the continued need to keep up with new demands from investors and regulators (and the technology to meet them) will remain.

What if we keep control? A good outsourcing partner, such as Intertrust Group, will act as an extension of your own team. Expectations for everything from callback and email response times to reporting deadlines will be set. You should know the names (and contact details) of each team member who works on your behalf.

Added up, that makes sense. That’s why we predict that 80-90% of private equity funds will outsource back office functions by the middle of the decade. When it comes to the back office, loosening your grip can benefit your business.

Why Intertrust Group?

Outsourcing fund administration to Intertrust Group includes the HR, technology and data security requirements that go with it. In addition we offer:

• access to the latest fund administration solutions without the need to invest

• sophisticated ESG tools so we can collect the right data on your behalf and model it for a range of global reporting standards

• a more efficient, transparent and compliant back office that is easy to scale, therefore growth is facilitated