Fund Strategy and Operations for a New Era

Principal investors and private equity firms face multiple challenges: disruption caused by the pandemic, structural changes in global macroeconomic systems and trade flows, geopolitical uncertainty, and an unprecedented level of undrawn capital in the industry. Competition for high-quality assets has never been greater, with funds increasingly looking for an edge.

Investment funds, irrespective of scale or scope, must uncover innovative ways to grow and differentiate themselves while ensuring that their underlying operating models are continually fit for purpose. Funds are increasingly expanding into new sectors, geographies, and asset classes; investing in digital and analytics capabilities; optimizing around people and organizational topics; doubling down on ESG investments; and rethinking their engagement models with portfolio companies. Fund strategy, operating model, and people and governance topics are now core C-suite agenda items.

How We Help Clients

Over the last six years, we have served as a key adviser to 9 of the top 10 global PE funds, as well as 9 of the top 15 global sovereign wealth funds (SWFs), representing almost $1 trillion in assets under management.

Our consultants work closely with private equity firms and principal investors to optimize five core capabilities:

We are thought leaders in the field of fund strategy and private equity fund operations, helping leading firms anticipate future trends in the industry, envision the next iteration of their business and operating models, and embed digital and analytics across their value chains.

To prepare for new and exciting opportunities that the post-COVID new reality will bring, principal investors and private equity firms need to reconfigure their underlying operating models and related technology infrastructure.

The pandemic has impacted funds in different ways: some are maintaining or improving their profitability, while others have failed to adapt quickly and are in difficulty. What does it take to win? Companies must move toward a modern technology platform based on modular architecture, unlock insights by formalizing data strategy and governance, and create an organization and culture that embrace new ways of working.

BCG’s fund strategy and operations consulting has driven significant impact for leading principal investors and private equity firms globally, on a number of topics related to fund strategy and operations. Examples include:

• We worked with one of the world’s leading public pension funds to develop a firm-wide global digital knowledge management and data strategy, focused on both investment activities and support infrastructure. With BCG’s support across both design and implementation, the fund launched a best-in-class digital knowledge capability, generating 7 to 9 basis points of added value.
• We helped a leading sovereign wealth fund in the Middle East redefine its firm-wide target operating model, increasing overall business efficiency by more than 30%, while increasing active intervention in business outcomes.
• We collaborated with a leading global asset manager to find arbitrage opportunities in the asset-backed security markets through more accurate predictions of loan performance and defaults in auto loans. Our approach identified over $20 million in arbitrage opportunities, with 85% to 95% accuracy in predicting charge-offs and prepayments.
• We partnered with one of the world’s most prominent principal investors to undertake a detailed end-to-end review of its internal operating model and technology architecture. Following our review and recommendations, the fund launched more than 38 targeted projects covering operating model and data strategy, with $5 million in benefits expected at the corporate center alone.

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