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The private equity (PE) sector has demonstrated remarkable investor confidence and market resilience amid the ever-changing global economic landscape.

In the United States, this growth is particularly evident. Private equity deals in the United States surged by over two times from 2020 to 2021, surpassing one trillion dollars. In the initial three quarters of 2022, the value of private equity deals approached around 562 billion U.S. dollars.

According to a report by McKinsey (McKinsey Global Private Markets Review: Private Markets Turn Down the Volume), the industry as a whole experienced consistent growth, with assets under management reaching $11.7 trillion as of June 30, 2022.

In recent years, private equity dry powder has been increasing worldwide over the past decade and reached record heights. In 2022, the dry powder of private equity companies reached 3.4 trillion U.S. dollars globally, up 500 billion compared to the previous year.

The surplus of available capital in the market signals strategic decision-making regarding the need for proper allocation, planning and management of funds.

Offshoring business services such as accounting and fund administration emerges as a strategic imperative for private equity firms.

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Offshoring Private Equity Business Services: An Overview

Offshoring offers access to specialized private equity solutions, ensuring firms stay aligned with industry best practices and innovations. Offshore private equity services can be broadly classified into the following types:

  1. Fund Administration & Accounting: Leveraging external expertise in fund administration and accounting enhances operational efficiency, enabling firms to navigate the intricacies of managing diverse portfolios seamlessly. This involves the back-office functions of private equity funds, such as accounting, reporting, and compliance. Offshore private equity firms provide administrative services to ensure that the funds are managed efficiently and effectively.
  2. Accounting: Services you can delegate to your offshore Accounting team are general accounting functions such as managing all accounting transactions, operations and financial activities. Outsourcing general accounting functions ensures accuracy and compliance.
  3. Precise Trade and Position Reconciliation: External partners bring precision to trade and position reconciliation processes, mitigating operational risks and ensuring accurate financial reporting.
  4. Strategic Financial & Management Reports: Offshoring guarantees that your business receives comprehensive financial and management reports, utilize advanced tools and methodologies to provide you with reports that are not only detailed but also actionable, allowing you to make informed data-driven decisions and build investor relations.
  5. Investment management: This involves the management of private equity investments, including deal sourcing, due diligence, and portfolio management, aligning with the fast-paced nature of the venture capital space. Offshore service providers also provide external support in venture capital services that enable efficiency in deal sourcing, evaluation, and execution, aligning with the fast-paced nature of the venture capital space. Offshore private equity firms provide expertise in various sectors, such as healthcare, technology, and real estate .
  6. Proactive Risk Management: External experts contribute to proactive risk management, helping private equity firms navigate uncertainties and comply with evolving regulatory requirements.
  7. Legal services: This involves the provision of legal advice and support to private equity firms, including fund formation, investment management, and regulatory compliance. Offshore legal services firms, such as Carey Olsen, provide private equity services across multiple jurisdictions.

These are just some of the many business services you can offshore.

Utilizing the Expertise of Offshore Private Equity Service Providers

Advantages of Offshoring Private Equity Business Services for Efficiency Enhancement

Offshoring private equity tasks enables firms to collaborate with third-party providers offering quality operational expertise at a cost-effective rate. Offshore service providers bring experts equipped with specialized industry knowledge and cutting-edge technologies. These offshore staff are equipped with advanced tools and in-depth knowledge to analyze your financial data comprehensively. By offshoring financial and administrative tasks, managers gain direct access to these resources, ensuring they have the right talent to navigate intricate financial landscapes, without the added expenses associated with in-house hiring.

This collaboration goes beyond financial considerations, providing managers with the time to focus on other crucial aspects of the business, such as asset and personnel management.

By partnering with a third-party asset management provider, a PE firm can allocate more time to streamline operations, enabling a sharper focus on core competencies and strategic decision-making, as well as ensuring firms can adapt to varying complexities and scale their operations accordingly.

When PE firms engage with reliable partners, they enhance their effectiveness across various areas, including deal sourcing and optimizing the performance of investor funds. Offshoring also streamlines investor relations tasks, such as managing capital call letters, cash flows, and capital contributions. This approach ensures operational transparency and accuracy, reducing errors in financial audits and boosting investor confidence.

As the industry faces evolving risks, outsourcing business services provides a proactive approach to risk mitigation. External partners bring specialized knowledge, aiding in compliance and regulatory adherence.

The high volume of assets and deals also demands scalable solutions. Offshoring offers a cost-effective strategy, allowing firms to scale operations based on market demands without compromising efficiency.

Conclusion

In conclusion, the outsourcing of investment management services in the PE space has shifted from a luxury to a necessity. As global adoption continues to grow, the benefits of outsourcing—operational efficiency, investor confidence, and cost savings—will drive this trend.

The strategic utilization of offshore private equity services not only addresses the challenges posed by surplus capital but also positions firms for sustained success in a dynamic and ever-evolving market.

Read more on our previous offshoring blog to gain insights on business service roles you can offshore.

Connext Global Solutions Offers Cost-Effective Offshore Solutions

Connext Global Solutions provides offshore expert accounting and financial services support at all levels with our cost-effective solutions. Connext Global Solutions helps companies build custom, dedicated accounting teams. Outsource financial and accounting services to Connext Global Solutions today.

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