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Investment strategies focused on extending credit through
private debt, bi-lateral loans and direct lending have grown
significantly in recent years. This trend is continuing as
investors search for higher yields than the traditional fixed
income products have produced, private equity investors spin up
direct lending teams, allocators increase their allotment to
private debt given the attractive risk-return profile and the
global market volatility brought on by COVID-19 endures. This
burgeoning interest in direct lending activity, coupled with
complex fund and deal structures, has seen increasing demand for
next generation solutions to alleviate the administrative burden
associated with bespoke financing solutions at scale.
It's against this market backdrop that we've been collaborating
with fund managers to address their workflow challenges through our
Private
Debt Solution. It aims to improve ROI by streamlining workflows
and enhance performance by organizing and digitizing data. In turn,
credit managers and direct lenders benefit from more modern
reporting processes and workflows that support active and informed
decisions around pipeline and portfolio management, compliance and
risk.
As we near the end of 2020, we took the opportunity to talk to
Jocelyn Lewis, the strategy lead for our Private Debt Solution, to
discuss some of the key trends we've seen in the market this year
and how our solution is helping fund managers navigate today's
landscape.
Q: Technology is becoming more important to the
industry. Why do you think this is?
Growth and competition within the private debt segment is a huge
driver for technology. This year in particular, we've seen that
fund managers are looking for cost-effective technology solutions
that can help them to alleviate the administrative burden
associated with increasing deal volume and structural complexity.
Essentially, they want to spend more of their time focused on alpha
generation and beta management. In order to do that, they need
technology that their teams can leverage to effectively organize
their data and processes, safely and securely share information and
facilitate more expedient reporting and communication for informed
investment decisions.
Q: There are many different teams involved in managing
the lifecycle of a debt investment. Can a single solution really
cater to them all?
Our integrated solution spans the entire credit lifecycle and
connects all of the key participants in the deal from originators
and credit analysts to portfolio managers, investment committees,
asset management, operations teams and investor relations. It was
really important to us that we developed a solution that supports
and connects all of the relevant teams. So, for example, for
originators, we provide real-time, centralized pipeline
information, while for credit analysts, we deliver bespoke
analytics and reporting capabilities. We spent a lot of time with
our clients to ensure we understood the exact requirements of
different teams before we started product development.
Q: What capabilities are included in the
solution?
Our platform brings together pipeline management, underwriting,
deal execution & funding, loan administration &
reconciliation, agent services, portfolio management and valuation.
Clients can access each capability as a point solution or select an
integrated platform for end-to-end lifecycle management that grows
with their firm.
Q: What makes your solution so popular among market
participants?
Our flexible solutions allow our users to share information
across teams without over-engineering data ingestion and
connectivity to clients' existing systems. And, as we continuously
release new product features, we differentiate by releasing these
features for all users, without the need for expensive and
time-consuming work orders. Additionally, the regular feedback loop
from our clients and market participants informs our product
roadmap for maintaining a best-in-class functionality to support
our user base. We also provide simplistic pricing based on scoping
the implementation requirements as well as predictable licensing
costs to avoid hidden fees for our clients. Our solutions are
supported by a dedicated client management team of super users who
are available 24/7 to address any questions clients have.
Q: What is the single most important benefit of the
solution?
Digitizing data in an organized fashion to create more efficient
portfolio monitoring and to simplify reporting processes is a
significant benefit to our clients. Data transparency from the
borrower to the lender and from the lender to their limited
partners is crucial in today's environment. Investors are asking
more questions, more frequently, and about a broader range of
topics including valuations, diversity, ESG and technology. These
ongoing diligence queries lack standardization and include
comprehensive questions in varying formats. Our solutions give our
users the technology to ingest information from their borrowers
into their own database and then query the database, as needed for
ad-hoc, curated content that they can deliver confidently and
quickly in support of an investor request. By simplifying investor
reporting, teams have less disruption to their day-to-day routines
and investors benefit through the speed and efficacy our solution
brings.
Q: What enhancements can clients expect for next
year?
The simplicity of automatically setting up investments for loan
administration and portfolio monitoring has been well received by
our clients this year. Next year, we plan to build on this by
adding additional features to the solution. Additionally, based on
user feedback, we are looking to enhance both our pipeline
functionality and our covenant monitoring capability. Stay tuned to
our blogs, vodcasts and other thought leadership - which is all
available on our Private
Debt webpage - for more information and feel free to contact us
if there is a specific topic you would like us to address.
Posted 16 December 2020 by Jocelyn Lewis, Executive Director, Private Debt Strategy, Financial Services, IHS Markit
IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.
