• Three out of four CFOs expect their firms to raise another fund of equal or greater value within next three years
  • Regulation and compliance are most pressing challenges for 45% of CFOs  
  • 80% of CFOs expect to hire fewer professionals this year

 

CONFRONTED with numerous changes that affect their business model, most CFOs at private equity firms recognised that global regulation and compliance, as well as operational efficiency, are the top challenges facing their firms over the next two years, according to Navigating the headwinds, EY’s inaugural global private equity survey in collaboration with PEI. Despite these challenges, CFOs are optimistic about future opportunities and growth, and have been responding to the changing environment by increasing investments in process and technology.

Kirsty Mackay, EY’s Executive Director, says:  “The report revealed that CFOs are confident that the industry will continue to grow which is good news for the Channel Islands’ PE industry. It is particularly reassuring that 80% of firms surveyed have raised capital in the last four years, with CFOs taking a bullish attitude towards future investment opportunities.”

For 45% of CFOs, regulation and compliance is at the top of the list of their concerns for 2014.They also cited the increased regulatory demands have put a strain on their firm’s resources and have limited their ability to focus on key priorities. Forty percent of respondents said that regulatory issues hinder their ability to oversee operational efficiency. 

Mark Lee, EY’s Head of Private Client and Trust in Jersey said: “As a result of the changing regulatory environment CFOs are facing increased demands with the same or fewer resources. As a consequence, at EY we are experiencing increased demand for assistance on tax compliance and tax reporting matters from firms wanting to alleviate the administrative and risk burdens associated with increased regulation. This demonstrates that business leaders are thinking differently about how they run their operations; manage their people’s time and how they utilise resource most effectively to create new opportunities to allow their firm to remain competitive.”

 

With regard to headcount for performing functions such as fund accounting, investor relations, tax, technology, valuation and human resources, CFOs said they plan to hire fewer professionals in the next few years. In areas where they plan to hire, CFOs are looking for talent with specialised competencies, such as fund accounting (26%), investor relations (24%), compliance/risk management (17%) and portfolio analytics (17%). More than two-thirds of the firms (72%) said they currently outsource or expect to outsource technology functions, while 66% say they already outsource tax functions. 

Kirsty concluded “While uncertainties are ever present with respect to regulation and compliance across jurisdictions, Jersey is responding proactively to these challenges. The Island placed itself in a favourable position by being in the first tranche of jurisdictions to sign the AIFMD cooperation agreement, providing the European funds industry with confidence that Jersey can continue to facilitate alternative investment funds business within Europe. Locally, I am witnessing businesses making sure they have the knowledge and skill sets available to them to turn the uncertainties regulation and compliance present into new opportunities for their firms to thrive in the future.”