Will Fractured Data Chains Hold Private Markets Back in 2025?

Following a prolonged period of illiquidity in private markets, marked by delayed exits and tough fundraising conditions, there is a palpable sense of optimism among asset managers and allocators about the potential for a rebound in deal activity and portfolio exits in 2025.

With externally managed AUM for private assets now expected to exceed $25 trillion by 2028, the question is how allocators and managers can best position themselves to capitalize on this next phase of growth in private markets by scaling up their operations, including in the fast-growing private credit asset class.

A recent research report by the Celent analyst house examined the industry's readiness to support this anticipated growth in terms of the health and scalability of its data management and operational processes. The report uncovered barriers to optimal data utilization for which the author coins the term "the great data chain problem", referring to factors that create inefficiency and opacity throughout the investment lifecycle.

The findings of the report align with what we are seeing among private investment managers and institutional investors in our global community of market participants. They are challenges we are helping to address with our iLEVEL middle-office operating system and broader array of solutions and services.

[Join our webinar on January 29, when I will be discussing the findings of the report with Cubillas Ding, Research Director at Celent]

Data lockups and complex reporting

The Celent report spotlights how the industry’s ability to access and use data is compromised in three key ways.

A rising wave of unstructured data. More frequent information requests, greater data granularity and diverse reporting practices are contributing to a "deluge of unstructured information exchanges" that buries important information in non-machine-readable formats. Being able to extract, normalize and integrate this type of data so that it can be used across the organization is key. 

High-friction data chains. A lack of data mobility and information fluidity is creating "data lockups" and undermining the operational value chain. That effect is compounded as high-friction data traverses the lines of communication between asset allocators, managers, portfolio companies and intermediaries.

Inadequate disclosure and reporting. Private market investments span diverse industries and disclosure requirements. This fact, together with the overall low operational maturity and reporting compliance levels of portfolio companies, is complicating the reporting process for midmarket firms.

“A strong desire for change”

The report describes an industry committed to healing this fractured data chain and preparing for increased growth, with two solutions in particular showing great promise:

Common reporting standards, such as those ILPA has developed, have gone a long way towards helping institutional asset managers normalize the performance information in their portfolios. The original reporting template, adopted in 2016, is now used by 40-50% of the industry. Recognizing the value of a shared reporting standard, iLEVEL has supported the ILPA template since 2018 in addition to offering bespoke reporting options.

Artificial intelligence is also seen as a key component, with more than one-third of the firms interviewed for the Celent report identifying it as the greatest driver in the evolution of the alternatives market.

iLEVEL and AI-enhanced data processes

We are seeing an enormous appetite for data among asset managers who want to better manage their existing portfolio, raise funds, and identify and structure the next deal. We are also seeing a massive increase in data requests and overall data appetite from their investors. We know that AI is the key to helping our industry reach (or even exceed) AUM targets by easing data friction and improving data hygiene. 

Recognizing its potential to significantly enhance data quality and availability, AI has become integral to the roadmap for our iLEVEL solution. We have developed AI-driven data ingestion technology that allows platform users to seamlessly drag, drop and extract performance data from their financial statements. This application of AI enables our clients to ingest one of the biggest sources of unstructured data, thereby reducing the risk of human error and giving clients more bandwidth to manage their portfolio companies. We are empowering them to tap into larger volumes of data from a multitude of sources in pursuit of investment alpha.

The promise of frictionless data

Despite the challenges mentioned above, the Celent report also reveals an alternatives industry that is optimistic about the future. We share this optimism.

Growth, whether organic or achieved through M&A and partnerships, will spur the need for processes that support efficiencies and rapid scale. Finding better ways to organize, store, master, and enrich fund and portfolio data is the key to meeting investors' reporting expectations and giving them the ability to see and analyze increasingly diverse alternative holdings. We are proud to support our iLEVEL client community of more than 700 asset allocators and managers in this endeavor and we are excited to help them take their operations to the next level through a series of exciting product enhancements throughout 2025.

For more on this topic, join our webinar with Celent on 29 January or download the full report: Overcoming Fractured Data Chains and Achieving Operational Brilliance in Private Markets.

Learn more about iLEVEL here.