From Silos to Symbiosis as Public and Private Portfolios Converge

Forward-thinking firms are shifting away from traditional models and exploring new investments. A key part of this shift involves moving beyond the constraints of conventional asset classes and venturing into the private markets. 

Why this change? Private markets offer several advantages: the potential for higher returns, greater portfolio diversification, and reduced volatility. These factors are especially attractive in today's uncertain economic environment. 

But there's more to the story. As capital flows shift into new asset classes, private markets firms are becoming hubs of innovation and growth. Asset managers not only gain access to potential investment opportunities but also tap into the pulse of cutting-edge developments. 

The move to private markets isn't just a trend. The shift is a strategic decision that reflects a broader movement among investors. An ability to adapt and embrace new opportunities is crucial for asset managers seeking to maintain their competitive edge. 

How to unify public and private investments   

Combining public and private investments can create a complex environment for asset managers. The differences between asset classes are significant, from the types of data involved to investment timelines and regulatory requirements. 

Data and investments scattered across multiple systems can make it difficult to get a clear picture of your overall holdings and performance. This lack of visibility can lead to subjective decision-making and missed opportunities for optimization. 

Calculating performance can be especially challenging, as there are no universal standards across public and private markets. Many firms end up calculating separate performance figures for public and private investments, hindering comprehensive oversight and the ability to create blended strategies. 

As multi-asset class strategies become increasingly important to drive returns and growth, having a comprehensive data and operations framework is essential. This framework should be designed to seamlessly integrate and manage the unique aspects of both public and private investments, ultimately unlocking new opportunities for your firm. 

A data framework to bridge the public-private divide 

A centralized data model can help break down the silos that often exist between public and private investments. This unified approach provides a holistic view of your portfolio, enabling more informed decision-making, better risk management, and, ultimately, improved performance. 

The key to successfully combining public and private investments lies in implementing a comprehensive data framework designed to: 

Bring your holdings together 

Centralizing your holdings data within a single, accessible system offers numerous benefits. Operations and reporting teams can quickly find the information they need, while portfolio managers gain a complete view of their overall exposure. Streamlined access to data empowers your firm to create blended funds and strategies, combining the strengths of both liquid and illiquid assets. 

Blended strategies open exciting possibilities for differentiation and risk reduction. By mixing public and private investments, you can craft unique offerings that cater to a wider range of investor preferences. Additionally, the ability to effectively manage returns during market fluctuations gives your firm a distinct competitive edge. 

A data model capable of handling all aspects of your portfolio — from transactions and holdings to lifecycle events across various asset types — can be the key to setting your business apart in an increasingly complex market. 

Align industry classifications 

Combining public and private investments often involves reconciling differences in industry classifications. A strong data framework can help by translating classifications used in private markets to those commonly used for publicly traded assets. 

This alignment is crucial for analyzing your overall industry exposure and creating blended funds and strategies. By understanding how your private holdings fit into the broader market, you can make more informed decisions about portfolio construction and risk management. 

Simplify performance measurement  

Accurately measuring performance across public and private investments can be complex. Public assets typically use standardized methods like P&L calculations, while private assets often rely on metrics like IRR and multiples. There's no single industry standard for combining these different approaches. 

A good data framework should be able to handle disparate methodologies within a single system. This allows you to generate comprehensive performance reports that reflect the true value and performance of your entire portfolio, regardless of asset class. A holistic view of performance enables you to make more informed decisions about resource allocation and strategy optimization. 

Build an ecosystem for growth and adaptability 

Flexibility is a cornerstone of a successful data framework. The best system is equipped with self-service tools that empower your team to create customized data models and expand them with user-defined fields as needed. This type of system creates a dynamic data ecosystem where you can integrate new models and datasets as your organization grows and explores new asset classes. 

With a truly flexible data ecosystem, you're not just managing data — you're creating a powerful engine for growth and adaptability. This enables you to respond to evolving market conditions, capitalize on emerging trends, and stay ahead of the curve. 

Tailored calculations for optimal insights 

Private assets aren't valued or traded as frequently as public assets, making P&L calculations less meaningful in some cases. A flexible data framework allows you to choose the most appropriate return method for each asset class and easily include custom calculations. 

These custom calculations can even bridge the gap between different performance metrics. By finding ways to translate one metric to another, you can integrate public and private asset performance into a single, unified dataset. This provides deeper insights and enables you to make more informed decisions across your entire portfolio. 

Choosing the right data framework 

When implementing a data framework, your firm has options: build a custom solution, buy an existing financial data platform, or partner with an expert. Each approach has its own benefits and drawbacks. 

• Building a custom platform provides maximum flexibility but can be time-consuming, resource-intensive, and comes with high costs.  
• Buying can accelerate implementation and streamline reporting processes, but it may be difficult to influence the roadmap of a purchased product. It’s also important to not underestimate the work required to integrate a new platform.  
• Partnering can offer valuable guidance to help you get to market faster, reduce operational footprint, and build in adaptability. Finding the right partner can be difficult. However, with the right support, your firm can embrace the opportunities that arise from converging asset classes. 

READ MORE: A Framework for Optimizing Time to Value for Data Initiatives 

The power of a unified data framework 

A comprehensive data framework is more than just a tool for analysis — it's a strategic advantage. With the right infrastructure in place, your firm can differentiate itself through innovative blended strategies, optimize capital allocation across all asset classes, and deliver faster, more insightful reporting to your investors. 

Beyond these immediate benefits, a good data framework clears the way for new data science initiatives. By leveraging advanced analytics and machine learning, you can unlock deeper insights, identify hidden patterns, and make more informed decisions about your investment strategies. 

Key takeaways 

• Private markets are a key growth area: As returns for traditional assets diminish, the private markets beckon with potential for higher returns, diversification, and innovation. 
• Data integration is critical: Combining public and private investments requires a robust data framework to overcome challenges in data management, performance measurement, and reporting. 
• A unified data model is the foundation: Centralizing holdings data and aligning industry classifications enables informed decision-making and a holistic view of your portfolio. 
• Flexible performance calculations are essential: A system that can handle diverse metrics and custom calculations ensures accurate performance assessment across all asset classes. 
• Build a data ecosystem for the future: Prioritize flexibility and scalability in your data framework to accommodate growth and evolving market needs. 
• Choose the right approach: Evaluate whether to build, buy, or partner with an expert to implement a data framework that aligns with your firm's resources and goals. 

To learn more about embracing convergence to stay competitive, support innovation, and drive growth, watch our fire side chat: How the Best Investment Managers Operationalize Private Assets.