For years, fund managers in private markets have competed primarily on investment performance, track record and access to deal flow. Those factors remain important, but I believe the industry is entering a new phase where fund governance and structuring will become some of the most important differentiators in attracting capital.
This shift is being driven by a simple reality: alternative investments are no longer the exclusive domain of large institutions.
Private credit, private equity, infrastructure, venture capital and secondary market strategies are increasingly being packaged for wholesale, high-net-worth and, in some cases, retail investors. Managers are developing evergreen funds, semi-liquid structures, interval funds and continuation vehicles to broaden access and meet growing demand for alternative assets.
This innovation is both necessary and welcome.
As traditional asset classes face ongoing volatility and investors seek diversification and income solutions, alternative assets offer compelling opportunities. Fund managers that can democratise access effectively will significantly expand their addressable market.
However, greater accessibility also changes the rules of competition.
As private markets move into wealth management channels and digital investment platforms, investors are being presented with more choices than ever before. Increasingly, investors are not simply asking, “What does this fund invest in?” They are also asking, “How is this fund structured?”, “Who oversees it?” and “How are conflicts managed?”
In other words, competition is moving beyond investment performance and toward the quality of the product itself.
Fund structure is becoming a key part of the value proposition. Liquidity mechanisms, redemption frameworks, investor communication processes and governance arrangements are no longer back-office considerations. They are becoming front-of-house features that influence investment decisions.
At the same time, operational excellence is moving into the spotlight.
Private market funds that were originally designed for a small number of sophisticated investors must now support potentially thousands of investors, multiple distribution partners and increasing expectations around transparency and reporting. Investors are becoming accustomed to digital experiences that provide timely information, efficient onboarding and clear visibility of their investments.
Managers with strong infrastructure, technology and administration capabilities will have a clear advantage.
Yet I believe governance will emerge as the most important differentiator of all.
Recent fund failures in Australia and overseas have highlighted the consequences of weak oversight, conflicts of interest and governance structures that fail to provide sufficient independence. Investors are becoming increasingly aware that strong performance alone does not eliminate governance risk.
As private markets continue to grow, trust will become just as important as returns.
This is particularly relevant where fund managers perform multiple roles within a structure, including investment management, governance oversight and trustee functions. While these models may have historically been accepted, regulators, industry groups and investors are increasingly examining whether greater separation of responsibilities can improve accountability and investor protection.
That does not necessarily mean every fund requires an external trustee or identical governance model. Every structure should be assessed on its own merits. However, independent oversight, whether through trustees, boards, administrators, custodians or governance committees, is increasingly becoming a mark of quality rather than simply a compliance requirement.
In my view, fund managers that embrace this reality earliest will be best positioned for success.
The next generation of investors will judge managers on more than returns. They will assess transparency, governance, operational resilience and alignment of interests. In a market where products can be compared instantly and information is more accessible than ever, strong governance becomes a powerful signal of credibility.
The private markets industry is undergoing a profound transformation. As access broadens and competition intensifies, fund structure and governance will move from the margins to the centre of investor decision-making.
The managers that prosper will not only be those with the best investments. They will be those with the most robust, transparent and investor-focused structures.
In the years ahead, governance will not simply support fundraising.
It will help drive it.
By Koby Jones, The SILC Group
