Driven by a convergence of strategic, commercial, and client-driven forces, traditional asset managers are often tempted to expand into private markets assuming their current operating model will easily adapt to new asset classes. After all, the systems built for public markets are strong, efficient, and highly automated, so it feels like it should be a reasonable expectation.
But once private market activity starts flowing through the organization, reality looks very different. Instead of stretching to fit new workflows, the traditional model quickly shows its limits. It’s not that the model is broken – it was simply never designed for how private markets operate.
To determine what needs to change, it’s important to examine how private market operations differ from the traditional model across several key areas.
From Transactions to Lifecycle Events
Public markets run on standardized, high-volume trades. Processes are linear, data is structured, and automation thrives.
Private markets, by contrast, require a shift away from traditional transaction processing toward the management of non-standard events and document-driven workflows.
Instead of trades, private market activity is defined by capital calls, distributions, valuation updates, loan amendments, resets, and other negotiated terms that arrive as PDFs, emails, or downloads from 3rd party websites; all of which require interpretation and introduce wide variability across sources.
Positions and Cash Move on a Different Cadence
Traditional positions are updated at settlement, and cash forecasting aligns with predictable cycles.
Private market activity operates on its own timeline. Positions change only when events occur. Cash demands can be urgent and irregular (short notice of capital calls, staged loan fundings, and unpredictable distributions).
As such, liquidity planning becomes an operational dependency, demanding tighter coordination across Investments, Operations, Finance, and Treasury.
Technology Must Support Interpretation, Not Just Automation
Public market systems excel at predictable workflows. Private market workflows, on the other hand, are far less predictable and require capabilities that can handle unstructured data, inconsistent timing, and bespoke events.
Rather than replacing existing technology, traditional asset managers are more likely to augment the existing stack with ‘interpretation’ and ‘coordination’ capabilities, such as the following.
- AI powered document ingestion/OCR
- Document classification and metadata tagging
- Case management workflow tools
- Private equity & private credit platforms
- Loan lifecycle/event engines
- Data normalization layers
- Integration hubs
- Operational dashboards for events and dependencies
Strategic Framework for Scaling Private Market Capabilities
To scale private market capabilities without impacting traditional operations, several guiding principles will differentiate firms that make the transition effectively.
- Start with workflows, not technology – Private markets break traditional trade pipelines, so it is vitally important to document investment lifecycles first before exploring broad solutions.
- Invest in AI-powered document extraction early – A vast majority of critical data will be sourced from unstructured documents. AI document extraction can help mitigate the costs and operational risk associated with manual data entry.
- Turn documents into answers – Build an AI-enabled central repository that stores all documents and extracted data, responds to natural language queries and provides a unified view across private and public holdings.
- Assign clear ownership across the investment lifecycle – Private markets blur traditional lines of functional responsibilities between Investment Teams and Operations. Establish clear accountability to prevent delays and downstream errors.
- Strengthen cash forecasting – Build liquidity buffers and stress test funding scenarios to manage committed capital, unpredictable drawdown schedules and distributions.
- Rethink the staffing model – Needs will shift from a staff that can execute routine processes to staff with the skill set necessary to make high-value judgement calls.
Conclusion
As traditional asset managers diversify beyond traditional assets, the operating model must evolve to support workflows that are far less standardized, more event-driven, and heavily dependent on unstructured data.
Olmstead brings a proven methodology, deep knowledge of both traditional and private market operations, and the expertise required to guide asset managers through a disciplined front-to-back operating model transformation. If your organization is considering private markets or looking to scale the existing operating model, let us show you why Olmstead is the right partner for your journey.