Launching a private markets program: part 3 - management
April 8, 2025
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Key takeaways
- Given the additional complexity, managing a private markets program post-trade has traditionally required more time and effort than public market portfolios.
- Effectively dealing with raised and committed capital across funds requires a clear, real-time view to ensure efficient allocation and planning.
- Relatively unpredictable capital calls and distributions make cash flow management more challenging for advisors.
- Less standardized data, delayed valuations, and complex tax reporting add extra layers of difficulty to performance tracking and compliance.
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Once you have successfully executed a fundraise in private markets, managing the investments can be complex, not just because of the additional workload and administration, but also because of certain challenges that fundamentally reflect the distinct operating model of private markets funds.
Here is a breakdown of just some of the major considerations when servicing a private markets program - and how we at Opto might be able to help.
Deploying capital
Planning can be a challenge for CIOs as a fund moves past the fundraising phase and reaches a close (or closes). It is critical to maintain a holistic view of the capital you have raised and the capital you have committed to underlying investments across your funds.
How can Opto help?
Our fundraising tracker allows your investment team to track the progress of your firm’s advisors towards meeting or exceeding your target fundraise for each fund vehicle, and see a granular pipeline for subscriptions.
Easily track the remaining fund allocation capacity through your dashboard (see chart) and view details of any prospective funds in the pipeline. Simply submit allocations for each fund and we handle the rest, including managing subscription documents and transactions for underlying managers.
Dealing with activity updates, capital calls, and distributions
Every private investment for each client generates activity updates on both the fund vehicle level and for underlying investments. Aggregating and distributing these can take significant time and effort for advisors with many clients, particularly as a private markets program scales.
In addition, the relative unpredictability of – and limited notice for – capital calls means advisors must actively manage cash to ensure that their clients have sufficient liquidity. At the other end of the investment lifecycle, they need to track distributions from funds as they exit investments, and factor those distributions into future portfolio planning and reinvestment for clients.
How can Opto help?
Our platform alerts advisors to any fund and underlying fund updates and aggregates them in a central dashboard.
Our Pacing tool (as discussed in part one) empowers you to model the ramp-up period to reach long-term target allocations, but also allows you to plan for the unique cash flow patterns associated with private markets investments as exits create liquidity.
In terms of our fund solution, we allow capital calls from underlying funds to be structured according to your preferences and consolidated on a quarterly or annual basis, potentially leveraging a line of credit to cover calls in the interim. This simplifies management for advisors, ultimately reducing client communications on capital calls to a single, digital notice.
End clients can also access all of their relevant documents, such as financial statements, capital calls and fund updates, in a central, secure, customized, and white-labeled portal.
Managing performance and tax reporting
On the reporting side, there are a number of potential challenges, which include:
Less structured data: Reports from private funds may be less standardized than those provided for publicly-traded securities and may require more time and effort to review.
Slower update cadence: Private funds typically only release valuations on a quarterly basis, though not all underlying funds may deliver them at the same time, presenting challenges in aggregating and communicating performance to clients.
Performance reporting issues: The different reporting requirements and distinct investment model may present issues integrating performance data with your reporting software and complicate portfolio construction and management. In addition, private funds have unique performance measures, often expressed in multiples. Advisors need to understand the meaning of each of these metrics and be able to explain them to clients, who may not be familiar with these terms.
Late and unpredictable tax reporting: Advisors with clients investing in private markets may face extra burdens when it comes to tax season, particularly as most of these funds provide Schedule K-1s, rather than Form 1099s. These are more complex, can take several months to be delivered, and then typically not all at the same time. This usually means filing tax extensions. If a client has invested in multiple private funds, they may receive multiple K-1s, each with its own set of reporting requirements. Private funds may also invest in multiple states, which may result in the need to file multiple state tax returns.
How can Opto help?
Our platform provides unprecedented levels of transparency and convenience. In addition to consolidating qualitative news on activity across your funds and underlying investments, we provide details on underlying exposure and quantitative performance reporting to give you a more complete real-time picture of a vehicle’s performance and automate client communications.
Fund performance data can be reflected in your custodial and reporting providers. Custodians include BNY Mellon | Pershing, Charles Schwab, and Fidelity, while our platform can connect with Addepar, Orion, Gen II, Envestnet Tamarac, and Black Diamond, among other reporting providers.
In terms of understanding private markets, our website features a plethora of educational videos and articles for both advisors and end-clients.
From a tax perspective, each fund vehicle can give clients exposure to multiple underlying funds or direct investments, but provides a single (Opto-supplied) K-1 for tax filing purposes.
This is part three of a three-part series, laying out how Opto is a truly end-to-end solution for RIAs and family offices to do private markets better. Read part one on “build” here, and part two on “fundraise” here.
To learn more about Opto, email us at partner@optoinvest.com, or schedule a demo: www.optoinvest.com/#learn-more.
Important disclosures
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