Embracing Change with Adaptability, Transparency, and Technology

Successful fund managers and business leaders understand that change should not be feared—it should be seen as an opportunity to differentiate and deliver better returns for clients.

Yet, it feels like the pace of change is quickening. Geopolitical shifts, regulatory changes, and evolving market trends drive uncertainty, making one attribute more essential than ever: adaptability. While we cannot precisely predict what lies ahead in 2025 and beyond, experience has shown that reacting quickly to change is vital and can create a significant first-mover advantage.

And adapting to change depends on greater transparency—more access to accurate, real-time data that enables informed decision-making in fast-moving markets.

What is driving the need for transparency in private markets?

Having clarity and clear insights into investment returns is more critical than ever. As private markets continue to evolve, limited partners (LPs) are demanding greater visibility and control over their investments, a demand growing in lockstep with their increasing allocation of capital to private funds.

LPs are also pushing for increasingly customized terms and conditions within deals, adding another layer of complexity. And, of course, we’re seeing increased regulatory scrutiny in private markets, adding further complications.

The result is a challenging dynamic—private investments are becoming more intricate and nuanced at precisely the same time that transaction volumes are climbing, and stakeholders are demanding greater data transparency.

That’s why it’s important for LPs and general partners (GPs) to work together to better align interests, increase transparency, ensure fairness, and build trust.

The challenge of calculating waterfall distributions

One of the key processes that we have looked at in some detail is calculating distribution waterfalls.

We’re finding that LPs are intensely focused on three main areas: their capital returns, carried interest, and clawback provisions. Errors in allocation calculations or the mistiming of distributions can lead to serious problems for LPs and reduce their trust in GPs.

With 86% of LPs identifying transparency as a priority in a recent CSC report[1], it’s clear that greater clarity in reporting isn’t just a preference—it’s required to build and maintain trust.

Many LPs have already voted with their feet. Almost two-thirds have pushed back on waterfall provisions they found lacking in transparency, while 39% have chosen not to commit to some investments due to these concerns.

The roles of technology and outsourcing

The most effective way for GPs to adapt to the need for greater transparency and customization is to either implement in-house technologies and tools to automate some of the tasks involved or partner with a trusted third party.

Our research found that half of GPs have made investments in their technology infrastructure over the past two years to provide an enhanced level of transparency to LPs while reducing calculation risks.

However, all GPs surveyed for our report said they still need further infrastructure upgrades in the next two years, making a strong financial case for outsourcing.

We firmly believe advances in AI and other technologies will continue to help improve compliance, investor communication, and risk management.

But as a GP, why build complex systems in-house when proven outsourced solutions already exist?

While standardized tech solutions are available, simply adopting a new platform won’t create a competitive edge on its own. At CSC, we know that every investment manager is different, and that technology should fit the specific strategic goals of every LP and GP.

How is CSC adapting to change?

Returning to the need for adaptability, CSC has continuously evolved over its more than 125-year history, from acquiring Intertrust Group to developing compliant platforms to meet the ever-changing needs of the investment markets.

Personally, my role has evolved from overseeing CSC’s corporate development efforts to leading a capital markets transaction-based business and now driving both capital markets and our broader suite of funds services for alternative asset managers. By combining our funds and capital markets teams, we’ve created a unique one-stop-shop and vertically integrated offering, providing both front-office transaction support and back-office fund services, supporting fund managers through the entire investment life cycle.

As President Theodore Roosevelt once said: “There can be no life without change, and to be afraid of what is different or unfamiliar is to be afraid of life.” By equipping ourselves with the right tools and technologies, we’ll be ready to adapt to whatever lies ahead.

What do you think are the best ways to remain agile in a turbulent world? Please share your thoughts in the comment section below to let me know how you view the need for transparency and adaptability in response to market changes. Thank you for your time and attention.

[1] Distribution Waterfalls 2024: Transparency, Technology, Trust