Technology Trends in Credit Portfolio Operations: from Automation to Outsourcing

Credit managers are navigating increasingly complex deal and fund structures, as well as record deal volumes and extraordinary amounts of data. At Interact London 2023, we brought together a panel of investment and technology experts to discuss how technology helps to improve efficiency and investment outcomes in credit markets.

Panelists were unanimous in agreeing that there is enormous potential for technology to improve credit portfolio operations. Processes can be automated, disparate sources of data and supporting documentation can be drawn together for ease of access, reference, and security.  Also, with key data confidently captured at every stage, workflows can become far more efficient – from deal inception to managing and monitoring portfolio performance.

Key to the success of any technology project, however, is people, and in particular, the clear identification of roles and responsibilities for both the project implementation and day-to-day technology management. The panelists also agreed that the most successful teams invest in understanding the potential of the technology and the associated data and workflow requirements, cautioning to not just expect instant perfection.

While investment in technology is required – both monetary investment and time commitment, the ROI and associated benefits of automation are widely recognized. Many private credit operations utilize a range of incompatible data sources, manually compiled into Excel-based models with inconsistent workflows due to key agreements and documentation often sourced from emails or even paper. "Data delivery is ripe for modernizing to make it more efficient, whether that be allocations, or simply transmitting payment instructions,” said one panelist.

Capturing data in private credit has unique challenges because, unlike public markets, there are no standardized datasets. Identifying the ‘golden source’ for key data points was discussed as a vital requirement by panelists, but once achieved, the group acknowledged that there is room for considerable automation of processes.

Panelists agreed outsourcing was a growing trend among private credit asset managers, but there is no one-size fits all solution. “It is important to be clear about where technology can streamline your processes, which is separate from areas that require critical thinking and where individuals can add value,” said one panelist.

This point was echoed by another panel member, who pointed out that certain modelling decisions, performance expectations and fee structures are unique selling points for an asset manager and so were often not suitable for outsourcing. But, he concluded, there was no point in managers reinventing the wheel. “At the end of the day we are not technology firms; if there is a standard problem that has been solved ten times before, excellent, educate us on the solution because there are much more interesting and challenging problems to do in-house.”