Private assets have moved from niche to strategic investments. As allocations grow, operational complexity rises. How to build an operating model that is efficient, scalable, and resilient, while still accommodating the characteristics of private assets?
Unlike public markets—where decades of standardisation have shaped mature operating models—private markets remain fragmented, manual, and heavily dependent on people. Today, firms are at a pivotal moment.
To insource or not to insource, that is the question
The industry has long circled around three options; insourcing, co-sourcing, or full outsourcing. Each comes with its own pros and cons.
- Insourcing promises control and proximity to investment teams but requires significant investment in people, systems, and governance;
- Co-sourcing offers flexibility, allowing firms to retain strategic oversight while delegating operational heavy lifting; and
- Full outsourcing maximises scalability but may reduce agility and internal knowledge retention.
Insourcing at what cost?
Even when firms lean toward insourcing, questions multiply. Should teams be onshore, close to portfolio managers, nearshore, or offshore where cost efficiencies are greater? Can internal teams keep pace with growing volume and complexity? GenAI now adds a new dimension, reshaping the cost-benefit equation entirely.
The theoretical benefits of insourcing do not always translate into operational reality. Talent shortages increased regulatory expectations, and the continuous need to upgrade technology push firms toward hybrid models. The decision is no longer binary. Instead, each organisation calibrates its own blend of outsourcing and internal capabilities.
Managed services powered by GenAI and workflow engines represent a new way forward and are more than simple outsourcing arrangements. They combine technology, expertise, and process excellence into a unified solution:
- Access to experts who understand private markets’ nuances, from capital calls to waterfall calculations, from funds’ requirements to SPV[1], from finance to tax;
- Tailored processes designed specifically for illiquid assets with tailored approaches for each sub-asset class; and
- Fit-for-purpose technology, blending third-party platforms with proprietary solutions.
Unlike UCITS or public markets, where standardised processes allow for unified platforms, private markets are defined by highly diverse operational requirements. Real estate, private debt, and private equity operate on slightly different data models, workflows, and valuation frameworks— making a single, all-purpose system unrealistic.
Asset managers are faced with a difficult choice: invest in multiple specialised tools, which quickly becomes costly and complex to maintain, or develop internal solutions to bridge the gaps. This fragmented landscape is a key reason many firms turn to managed services providers, who offer integrated, purpose-built operational infrastructure tailored to the requirements of each asset class.
At the core of these new models is data—structured, validated, and accessible — without which there can be no solution. This ensures that asset and fund managers retain full control and transparency, even when operational execution is delegated. Datacentric models also enable better reporting, analytics, and regulatory compliance.
Adoption at different speeds
Some organisations opt for a comprehensive outsourced model, delegating the entire operational chain to a trusted partner. This approach maximises scalability, reduces operational burden, and enables internal teams to concentrate on investment activities and client engagement.
Other organisations prefer a targeted approach, core functions remain inhouse, outsourcing areas where efficiency gains or expertise gaps are most pressing.
Across both scenarios, the model should be designed to scale, integrate, and evolve alongside each organisation.
The back office emerges as a must. Compared to the UCITS world, private assets operations remain less mature. As private markets open to retail investors and face increasing regulatory scrutiny, the pressure to industrialise grows.
A robust back office is no longer enough. Luxembourg as a whole, and asset managers in particular, must look more into middle office operations to contribute to value creation. This shift mirrors the evolution seen in public markets and can include activities such as cash flow forecasting and portfolio data management where middle office functions became central to operational resilience.
Conclusion
As private asset operations undergo a profound transformation, the traditional debate between in- or out- sourcing gives way to a more nuanced, data-driven approach. Managed services powered by GenAI and workflow automation offer a compelling alternative, blending expertise, technology, and scalability. As private markets continue to expand, operational excellence increasingly becomes a critical competitive advantage.
With decades of experience, a deep passion for the technologies that drive growth, and a careful balance of the right mix of tech and people, we bring unparalleled detail and expertise to every engagement. Reach out to us so we can support you in your growth journey, helping you apply the technologies and operational strategies that will set you apart.
[1] Special Purpose Vehicules
