North American PE and VC firms accelerate outsourcing shift: Ocorian
JERSEY, ENGLAND — North American mid-market private equity and venture capital firms are significantly increasing their reliance on third-party providers for fund administration. New Ocorian research reveals this trend is accelerating, driven by demands for greater operational efficiency and technological sophistication.
Outsourcing moves into the mainstream for fund operations
The research, which surveyed senior executives at firms responsible for $335.25 billion in assets under management, found that 81% of respondents predict their use of third-party providers will grow even more over the next two years.
The need for expert handling of complex functions like investor onboarding, ESG reporting, and fund accounting fuels this movement.
The data indicate that outsourcing is no longer a niche strategy but a mainstream operational necessity for a vast majority of firms.
Over the past two years, 47% of the firms surveyed reported that their use of third-party providers has increased across the entire fund lifecycle, with a further 44% stating that their usage has remained consistently high.
This trend is most pronounced in specific, high-touch areas; 74% of firms reported a significant increase in outsourcing for investor onboarding and ongoing investor services, a critical function for maintaining stakeholder relations.
This surge is set to continue, with Ocorian’s research clearly showing that the industry is doubling down on its external partnerships.
This projected growth underscores a fundamental restructuring of how firms manage their back-office operations, choosing to leverage external expertise to enhance their core investment activities.
Technology and AI drive outsourcing decisions
Firms are not only outsourcing more, but they are also becoming increasingly selective in the types of providers they do business with, requiring them to provide superior services, innovation, and integration.
Such caution is reflected by Preqin industry research that discovered that 27% of the general partners intend to change their fund administrator within one year, with errors and cost increase being cited as the main causes of change.
This inclination to change operational excellence and adopt newer technologies is a premium, essentially narrowing down to the capability of an existing firm.
When selecting a provider, technology is a paramount concern. Respondents ranked an innovation roadmap and responsiveness to emerging tech trends as the top technology-related factor in their decision-making process.
Shortly after this, the provider’s status regarding automation and trustworthy investment in cybersecurity infrastructure was assessed; additionally, the proposed software’s ability to seamlessly integrate with internal processes and utilize AI for improved analytics played a key role, indicating that companies prefer vendors who offer more than just viable services.
