Direct Lending has become a competitive segment for many alternative managers and traditional private equity firms. Growing out of the credit crisis when banks reduced their lending activities to companies, this alternative to traditional banks has expanded significantly since 2009 primarily serving the middle market. Direct Lending has enjoyed support from many governments as a way to get more liquidity into the credit markets. In North America alone, fundraising reached over 59 billion dollars in the last four years.
Given the success of their middle market private equity business and the inherent knowledge gained through years of operating in that space, an InvestTech client saw an opportunity to broaden their product offerings and provide a significant return through an expansion into Direct Lending. This also diversified risk and opened new markets for the business.
This traditional private equity shop needed an expert to guide them through the process and architect a Target Operating Model that would support direct lending while integrating with their current technology for the private equity side. Starting with a blank slate and intending to keep a light IT footprint, they wanted a partner who had worked for different types of investment firms to advise and guide them on building a scalable platform utilizing the latest technologies and best practices. The client’s minimal exposure to credit operations made InvestTech a perfect partner due to our deep knowledge of public and private credit assets and vendors in the space. Having helped many private credit and equity firms, InvestTech was able to leverage these experiences to expedite the process and better prepare the client for familiar asset class challenges around covenant monitoring/compliance, consistency in pipeline review for prospective deals, positioning for agent banking capabilities, and ensuring the flexibility around credit attribute tracking.
Through discussions across the organization, InvestTech recognized an opportunity to go beyond solving the immediate Direct Lending needs and enhance the investment operations platform across the organization. Reviewing existing processes, InvestTech identified a solution that would reduce redundancy, increase quality, and consolidate data across existing platforms, providing faster access to information. This served the entire business as a whole more effectively, not just the new debt offering. InvestTech proposed a strategic plan, which included the right mix of data architecture, outsourcing services, and portfolio management, to meet needs across the organization. This new Operating Model will serve not only as the Direct Lending platform, but through thoughtful design, the firm as a whole.
InvestTech continues to partner with this client, working as a team to help them implement the roadmap. Evaluating fund admin and debt servicer solutions, de-mystifying current workflows in detail, and determining the best approach to an enterprise-wide warehouse are the next steps on this journey toward a stronger operating environment and business as a whole.
New platforms and operational process transformations take careful orchestration and guidance. InvestTech takes pride in helping clients realize greater efficiencies and control, allowing these firms do what they do best – maximize return for their clients.
Call or e-mail InvestTech at 877.559.6077 or firstname.lastname@example.org to discuss your investment operations, technology or data management challenge. Our deep industry knowledge, proven methodology, and actionable business solutions give our clients a clear direction for today – enabling more opportunities for tomorrow.