Private Markets Need Tech Overhaul for Mainstream Push

In Brief:

Cesar Estrada, private markets head at Arcesium and former State Street executive who managed $1 trillion in assets, warns that alternative asset managers face a critical technology bottleneck as they diversify beyond traditional strategies. Speaking on the Alt Goes Mainstream podcast, Estrada argues that firms expanding into evergreen funds, wealth management, and asset-based finance are hitting operational walls that threaten growth. His analysis reveals how managers who built their businesses on Excel and siloed systems now struggle with daily NAV calculations, thousands of underlying loans, and demanding wealth channel clients. Without modern data platforms, he predicts these operational constraints will become insurmountable barriers to the industry's mainstream ambitions.

Big Picture Drivers:

• Market Evolution: Private markets shifting from institutional-only to mainstream wealth distribution channels

• Complexity Explosion: Managers diversifying across asset classes, fund structures, and investment strategies simultaneously

• Data Fragmentation: Legacy Excel-based systems creating operational silos that block cross-selling and growth

• Regulatory Pressure: New compliance requirements and liquidity demands forcing infrastructure upgrades

Key Topics Covered:

• Technology Infrastructure: How Excel-dependent firms hit scaling walls with complex fund structures

• Asset-Based Finance: Why ABF requires dramatically different operational approaches than direct lending

• Wealth Channel Expansion: How daily NAV requirements transform operational complexity for evergreen products

• AI Integration: Early applications of GenAI in private markets operations and data analysis

Key Insights:

• Operations Bottleneck: Technology limitations now prevent new product launches for the first time in industry history, forcing managers to confront infrastructure deficits that previously could be solved by adding more people.

• Volume Challenge: Asset-based finance funds may contain 100,000 loans versus 100 in traditional direct lending, creating exponentially more complex data management and monitoring requirements.

• CTO Evolution: Chief technology officers are becoming strategic business partners rather than just IT managers, making critical decisions about build-versus-buy technology strategies that directly impact competitive advantage.

• Wealth Channel Demands: Private wealth clients expect consumer-grade technology experiences similar to their brokerage apps, forcing managers to completely rethink user interfaces and real-time data delivery.

• Data Harmonization: Firms attempting to cross-sell products across their increasingly overlapping clientele must break down data silos that were acceptable when serving only institutional investors.

• AI Productivity: Early GenAI applications are already helping managers compress the time needed to find, validate, and analyze data before making investment decisions, with Arcesium's co-pilot enabling natural language queries of complex datasets.

Memorable Quotes:

• "Operations and technology become a real true bottleneck for new product launches, and that is something hard to swallow because you have been growing, and operations has never stopped you from going into something new." - Cesar Estrada, explaining how technology constraints now limit growth for the first time

• "Most of the infrastructure of private markets was built on the back of institutional clients being the main client. And today with not only private wealth, but also insurance evolving... they have a growing number of needs." - Cesar Estrada, describing the infrastructure mismatch as firms expand beyond institutional investors

• "They started as Excel shops. Excel remains a very important tool for a number of things, but most have outgrown it to now adopt what I'll call functional solutions for different areas... And what that has created is data silos." - Cesar Estrada, outlining how firms' piecemeal technology adoption created fragmentation problems

• "In the same way, direct lending is more operationally intensive than private equity. Asset-based finance is more operationally intensive than direct lending generally by a factor of N in terms of numbers." - Cesar Estrada, quantifying the operational complexity ladder across private market strategies

• "The investor is most important to our clients and they want their experience to be akin to that of their apps on their brokerage account." - Cesar Estrada, describing the consumer-grade experience expectations now entering private markets

The Wrap: 

Estrada's perspective reveals a private markets industry at an inflection point where technological sophistication will determine which firms successfully capture mainstream wealth opportunities. As managers attempt to serve both institutional and retail investors through increasingly complex products, those clinging to legacy systems risk being left behind while tech-forward competitors gain decisive advantages in speed, scale, and client experience.