Private markets take center stage

Private markets are no longer on the periphery. They have emerged as a powerful force in the investment landscape, moving to the very core of modern portfolios. Growing at twice the rate of public markets, private markets are projected to reach $26 trillion in assets under management and capture 37% of industry revenues by 2029 [1]. This rapid ascent challenges traditional notions of "alternative" investments, signalling a fundamental shift in capital allocation that is already well underway.

Navigating the Convergence: Opportunities and Challenges

As private markets surge into the mainstream, traditional asset managers are racing to capture a slice of this expanding opportunity. Many are pursuing this through mergers and acquisitions. At the same time, private market managers are also evolving, increasingly adopting public market strategies, offering semi-liquid investment options. This shift is clear in private credit, where the traditional model of illiquid, hold-to-maturity investing is expanding to include more liquid avenues such as secondary markets and securitization. 

However, the convergence of public and private markets is not without friction. Integrating these two asset classes within a single operational framework can be a complex undertaking. Many traditional managers expanding into private markets have felt the squeeze on margins, reflecting the challenges of managing these distinct instruments in tandem.  

The root of this friction lies in the fact that most institutions are still saddled with legacy infrastructure designed for a bygone era when alternatives were a niche allocation. As private markets surge towards 30-40% of total portfolios, the gap between operational reality and investment ambitions is becoming starkly apparent. 

The consequences of this misalignment are profound and far-reaching. Manual processes, siloed data, and fragmented systems lead to decision delays, heightened compliance risk, and a talent exodus that erodes investment performance. In this new paradigm, success will not be determined by those who have the most assets, but by those who have the most intelligent operations. 

The Quest for Unity: A platform to Streamline Complexity 

The integration of private markets into the investment mainstream has long been hindered by a fragmented systems landscape. A tangled web of point solutions and disparate providers has emerged, each addressing a narrow aspect of the investment lifecycle. The result is a complex, cumbersome patchwork ill-suited to the demands of today's multi-asset reality. 

This fragmentation manifests in myriad operational pain points. Extracting insights from the deluge of unstructured private market data becomes a manual, error-prone ordeal. Siloed systems obscure a holistic, real-time understanding of portfolio exposures. Rigid architectures hinder the ability to model illiquid assets' unique cash flow profiles. Taken together, these challenges make effective liquidity management and strategic asset allocation an uphill battle. 

SimCorp recognized that surmounting these hurdles would require more than incremental fixes. What was needed was a ground-up rethink of the investment operations paradigm, a unified platform purpose-built for the complexities of multi-asset portfolios. A platform that seamlessly integrates intelligent automation, real-time analytics, and predictive capabilities within a single, cohesive framework. 

The transformative power of this approach is captured in three bold statements from our clients:

Taken together, these three capabilities empower firms to seamlessly integrate public and private market assets into the very fabric of their investment DNA. This, in turn, unlocks the transformative power of true, total portfolio management.

Embracing the Future: The Path to Total Portfolio Management 

As private markets shed their "alternative" label and take their rightful place at the heart of institutional portfolios, the future belongs to those who can tear down the operational walls between public and private assets. Total portfolio management, powered by a unified data and analytics foundation, is no longer an aspiration, but an imperative.  

A holistic approach empowers forward-thinking firms with advanced tools like integrated risk models and on-demand liquidity forecasting. Armed with these capabilities, investment managers can dynamically optimize asset allocation, balancing return targets, risk appetite, and liquidity needs to construct more resilient, adaptable portfolios. 

However, realizing the full promise of total portfolio management requires more than just powerful technology. It demands a cultural shift that breaks down the silos separating asset classes and teams. A unified platform not only enables but requires this transformation, as old walls and boundaries become obsolete. In this new paradigm, collaboration and integration become the hallmarks of industry leaders. 

As alternatives become integral components of today’s portfolios, firms must adapt or risk being left behind. The path forward is clear: embrace a holistic approach to portfolio management, one that reflects the new reality of a world where alternatives are alternative no more.