About our survey
In the second edition of the KPMG Alternative Investment Funds Servicing Tech Survey for asset servicers and managers, we concentrated on AIF central administration and middle office activities. Our goal was to gather detailed insights into the adoption and impact of technology within the industry.
With a sample size of 15 key asset servicers and AIFMs, the survey delves into the current state of technological integration, identifying prevalent tools, platforms, and innovation that drives efficiency and compliance.
By focusing on these technological aspects, the survey highlights both the challenges and opportunities faced by the AIF sector in Luxembourg, providing valuable data into the challenges of asset servicers and managers, allowing them to benchmark their performance against their competitors.
A message from our lead partner
“In a sector that is slowly maturing, private asset players still rely heavily on Excel to perform some of their activities, even despite a stabilization of FA/TA systems and a continuous increase in dedicated IT budget.
AIFs dedicated and emerging technologies - such as Generative AI and data management solutions - continue to push forward further tech investment. To boost efficiency, asset managers and investors are demanding an increase in dynamic, innovative technology.”
— Annick Breton, Partner and Head of Management Consulting
Key takeaways
- Technology ecosystem
- Trends and insights
- New technology
We are seeing greater growth and maturity in the tech landscape.
The technology landscape for the Alternative Investment players is constantly evolving, but we have reached a certain maturation point in FA (Fund Accounting) and TA (Transfer Agent) activities.
All servicers are equipped with specialized systems, and a significant market share has already been captured by a small number of multi-functional systems. Those solutions are often moderately customized and able to support multiple asset classes.
Regarding recent implementations, there have been no significant changes since the 2022 edition of the survey , as approximately 50% of FA and TA software had been implemented over 10 years ago.
Cumulative AIF system implementations still in operation
- 312016
- 382017
- 422018
- 462019
- 542020
- 622021
- 692022
- 762023
- 832024
There is still a heavy reliance on Excel spreadsheets
Despite participants owning several systems to perform their activities (with an average of 2.6 systems per participant for FA/TA), Excel is persistently used, particularly for Financial Reporting and Corporate Secretary tasks.
Nearly 1/3 of surveyed servicers report using Excel for over 50% of their TA activities, which is especially high given the range of dedicated systems in use.
We must also note that there is a significant disparity between companies, with smaller firms more exposed compared to their larger counterparts.
System distribution per selected activities
- Fund accounting
23 5 2 1
- Transfer agent
15 4 2 4
- Financial report
5 4 1 6
- Cash system
1 4 7 2
- Regulatory
2 5 3 4
- Multi-specialized
- Specialized
- In-house
- Excel
As illustrated in the graphs, asset servicers and managers tend to use multi-specialized tools for core activities, which are supported by specialized and in-house solutions.
The landscape is different for transversal activities, where specialized software is the norm, supported by in-house developed solutions.
For digital channels, most solutions have only been implemented recently - approximately 65% since 2020 - and there are no clear references on the market yet.
System distribution for transversal activities
- Front-end portal
1 11 11
- Workflow
2 8 6
- Document management
5 6 1
- Data management
3 4 3
- Multi-specialized
- Specialized
- In-house
- Excel
Asset managers and investors
This year's edition was the opportunity to assess the key priorities market players perceive from asset managers and investors.
Driven by investor reporting and flexibility needs, asset managers are expecting technology to make their operations more efficient and user-friendly.
Asset manager demands
- Tech integration
7.9
- Operational efficiency
7.8
- Pressure on fees
7.4
- Cost efficiency
7.1
- Client-centric approach
7.0
- Cybersecurity
6.5
- Data security and privacy
6.5
- ESG integration
4.3
-
Low High
Timely reporting, transparency, and flexibility appear to be the demands from investors.
Both asset managers and investors share demands around heightened pressure on fees, and technology is the key priority for the market players.
Investor priorities
- Transparency and reporting
7.7
- Technology and digital solutions
7.1
- Customization and flexibility
5.9
- Pressure on fees
5.4
- Regulatory compliance
5.1
- ESG integration
4.6
-
Low High
Dedicated AIF IT budgets are increasing
In the 2022 edition of the survey, we observed that a continuous growth of IT budget would be expected for the 2022-2024 period. We found that this trend indeed manifested, as some players increased their budget by over 20% while others chose to stabilize.
Looking ahead in the next three years, we anticipate an acceleration in budget increases. 90% of participants plan to boost their AIF IT budget, and 60% of them forecast an increase of at least 20%.
Developments of new features will remain at the core of these future spendings.
Foreseen IT AIF budget evolution 2023-2026
- 10% 30% Remains stable
- 30% 20% 1-10% increase
- 40% 30% 10-20% increase
- 20% 20% Superior to 20%
- 2023-2024
- 2025-2026
Robust adoption of new technologies continues
Despite emerging only in the past two years, generative AI has seen rapid adoption by the industry, with 40% of the market players already utilizing this technology, and 80% being well-acquainted with it.
Large asset servicers, particularly AIFMs, express a higher adoption rate to the new technologies than smaller firms.
Tech adoption
- Optical character recognition (OCR)
60%
- Robotic process automation (RPA)
40%
- Generative AI (GenAI)
40%
Tech priorities aim to optimize processes and enhance investor services
Across both core and additional activities, market players are planning significant upgrades to their tech stack, focusing on improving current functionalities to reduce costs and meet client needs.
We also found that functional systems coverage is maturing overall and still leveraging on existing solutions.
On the other hand, investor onboarding remains critical for most participants, driven primarily by the needs of assets managers and investors.
Technology priorities
| Enhance functions | Implement new module | Implement new system / replace current one |
|
|---|---|---|---|
| Investor onboarding | |||
| Cash accounts and transfer | |||
| Financial reporting | |||
| Fund accounting | |||
| Transfer agent | |||
- High priority
- Medium priority
- Low priority
Digital channels, data, and analytics are less advanced in the market compared to core activities, and not all market players are equally equipped. While 87% of respondents have a client or investor portal, only 60% are equipped with a workflow management system or data system.
Among these, nearly half use an in-house developed solution, highlighting their willingness to implement a new system despite the lack of clear references on the market. They are primarily driven by the willingness to better meet client needs and improve group level synergy.
Interestingly, respondents using older or in-house solutions are not more inclined to changes than the others.
Willingness to implement a new system
- Data management and analytics
33%
- Client / investor portals
33%
- Workflow management
27%
What sets KPMG apart
Our findings highlight a dynamic shift within the AIF ecosystem's tech landscape. Although some participants continue to rely on traditional processes - such as Excel - the emergence of new, dedicated solutions and technology - such as generative AI - are unlocking growth opportunities for the industry. While the full extent of further advancement remains to be seen, current trends suggest that these new technologies will drive greater opportunities and innovation in the sector.
At KPMG Luxembourg, our team of experts are consistently ahead of the curve, identifying emerging trends to help our clients make informed decisions. Our approach, expertise, and talent enable us to grasp both the big picture and the finer details, allowing us to deliver optimal solutions for our clients, now and into the future.
