VIDEO | The rapid growth of private markets is driving a wave of innovation as the financial sector seeks to unify data from public and private portfolios into a cohesive operating model. With trillions of dollars flowing into alternative investments like private equity, credit, and real estate, industry leaders are tackling the operational complexities and transparency challenges required to meet the evolving demands of both institutional and retail clients.
Private markets, once dominated by institutional investors, are now reaching a broader audience as retail investors increasingly seek alternatives for portfolio diversification. “We’re seeing private markets become an essential part of a balanced portfolio,” explained Paula Avraamides, client executive and country manager at BNY at the PostTrade 360° Nordic 2024 session “Apples with pears. The challenge and promise of consolidating public and private market data in one operating model”. This expansion is reshaping the landscape, with major firms, including Blackstone, even advertising private equity directly to consumers—a significant shift that underscores the democratisation of private assets.
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Noting the industry’s efforts to simplify access, Sahil Bhandari, managing director at Growth Ventures shared that firms like BNY Mellon are investing in platforms and partnerships to enable easier entry, stating, “BNY is an investor in some of the platforms and we’re actually starting to build our own set of offerings.” Despite these advancements, operational challenges persist, with private markets lagging behind public markets in data standardisation. “In public markets, reporting is just seamless, right? It’s standardised, it goes through,” Bhandari said, contrasting it with private markets, where reporting often remains manual and fragmented. This disparity highlights the need for enhanced infrastructure and consistency as retail participation grows.
AI and automation
To address the complexities of private market data, financial firms are leveraging artificial intelligence (AI) and automation, particularly in document processing and data analytics. Bhandari identified intelligent document processing as an area with high potential for impact. “Today that is being done through a combination of screen scraping, manual intervention, and all sorts of other techniques,” he explained. With AI, private markets can streamline data extraction from unstructured documents like PDFs, making information more accessible for analysis and decision-making.
Challenges in ESG reporting and the push for standardisation
As investors increasingly demand transparency around environmental, social, and governance (ESG) metrics, the need for standardised data in private markets has become a priority. Yet, achieving consistency remains difficult. “The simple answer is…the challenges are very similar to what we’re seeing in public markets, but compounded,” Bhandari said. He pointed to the complex process of collecting and reporting sustainability data across various asset classes and geographies. “Imagine a fund with investments in 100 properties across different geographies,” he explained. “Each one would require its own reporting on energy standards.”
While larger funds are beginning to adopt standard ESG reporting practices, full consistency across the sector is still out of reach. Bhandari acknowledged, “The ecosystem is driving it. The investors are driving their fund managers to report in a standardised way, but are we at a point where you can say that there is consistency and standardisation yet? No, it’s not.”
Panelists:
Paula Avraamides, client executive and country manager, BNY
Sahil Bhandari, managing director, Growth Ventures
Hosted by BNY.
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