As private equity fund raising and investment continue to break new records across Europe and beyond, the outsourcing industry is playing a predominant role in supporting this unprecedented growth. However, unlike other professional service providers to the private equity world such as lawyers, accountants and tax advisers, third-party fund administrators have no pool of fully trained professionals they can draw from to help resource the sharp rise in demand for their services.
Therefore, it is critical that the private equity outsourcing industry identifies that managing staff resources is an absolute priority that cannot wait until tomorrow. Failure to plan for tomorrow’s resource today will not only impact the outsourcing industry’s ability to service new business, but as providers attempt to squeeze in yet another piece of new business existing clients start to suffer through reduced quality of service as a result of staff being stretched beyond their limits. Paradoxically, an outsourcing company that defers new business through lack of immediate capacity should be well regarded as a potential new service provider to a private equity house as it is likely that the company is safeguarding its quality of service to its existing client base as well as preserving staff morale.
In this article I would like to explore how we address the challenge of recruitment, training and career development at Northern Trust, and how this in turns creates capacity for new business.
Meeting the recruitment challenge
Currently Northern Trust has a team of 81 private equity fund administrators across three jurisdictions and is adding new teams in new jurisdictions – but at a measured pace. Only a very small fraction of our teams have joined Northern Trust from a specific private equity background, though many have previously worked in a financial, banking or accounting environment. We have over 50 clients, ranging from some of the world’s largest private equity funds to boutique funds. Understandably, our clients all have very different servicing needs and we need to recruit, train and retrain appropriate staff to meet each client’s bespoke expectations.
Whilst we are always pleased to recruit experienced private equity administration professionals, the unique nature of this service provision means that there is minimal spare capacity in the market place. Moreover, given that no college or training facility provides all encompassing private equity administrator training, there is no source of newly trained and qualified people to draw from.
Clearly, understanding these barriers to the growth of our servicing team we have developed a strong emphasis on ‘growing our own’: staffing resources through a comprehensive staff development programme. Even those few recruits from a private equity background are provided with a certain degree of training to familiarise themselves with Northern Trust’s servicing model.
The typical recruit is a university graduate who is seeking a career in the finance industry, however, we have recruited staff from many backgrounds, having clearly identified the necessary raw materials to build from. In addition to academic achievement, we look for a wide range of more generic skills such as project management, clear communication ability, IT and high numeric aptitude as a foundation for developing skilled professionals.
Obviously, we also recruit at more senior levels. Typically these candidates have accounting and legal backgrounds with advanced skills and capabilities that are applicable to the private equity world and that can be adapted to our business.
Strong interpersonal skills are also a key consideration. Our recruits must be committed to delivering a high quality, timely service to our clients. They should also be able to relate confidently with other team members, clients and their advisors who are very often in multiple jurisdictions.
We provide both a rolling training programme (“RTP”) with separate technical modules which is available to all recruits, and a staged development programme for those with no existing technical skills. Every recruit is assessed and enrolled in the most appropriate programme.
The RTP provides training on all facets of private equity fund administration – from developing a high level understanding of the industry and fund structures through to the administrators’ core tasks of bookkeeping, capital drawdowns, distributions, investments and divestments, corporate governance, minute taking, fund accounting and compliance. Other subjects, such as taxation of funds and their entities in different jurisdictions, are also covered.
The staged development programme sets out clearly desired levels of competence and the expected time-frames for achievement. The programme takes approximately two years to complete for a raw recruit with the appropriate level of aptitude and tenacity. As each level of competence is achieved the developing trainee is financially rewarded to reflect that achievement and added value to the company and our clients.
This probably explains why there is no specific, external training course to create private equity administration professionals: there are too many topics to cover over too wide a range of skills!
We use internal trainers drawn from our own operational staff as we found using external providers more often than not did not provide an acceptable level of focus on the specific requirements for private equity administration professionals. With some courses we found that no more than 30% of the content was directly relevant, because courses provided are very seldom bespoke for private equity, particularly where they revolve around bookkeeping, accounting and systems.
The company provides financial, paid study-leave and moral support to all staff members undertaking formal qualifications, which include the ACCA, CAT, MBA and ICSA qualifications. A large percentage of our workforce has completed, or is studying for, such qualifications.
On the job training
Given the bespoke requirements of each and every client and their funds and related entities new recruits also receive on the job training under close supervision where they can apply all of their newly attained skills acquired through internal or external training, or – in some cases – the skills they have brought with them. At this stage they learn the practical aspects of client interaction and that no two funds are ever the same!
As time progresses we expect our more seasoned professionals to understand the private equity market from a macro perspective and better understand the whole private equity market: from legal and taxation developments through to industry trends and new jurisdictions that are attracting investment interest for our clients. The ultimate achievement is to be able to interact with our clients at all levels.
Our highly-developed training programme has been critical to Northern Trust establishing private equity centres in Dublin and Chicago over the past 12 months to meet our clients’ needs for local full service centres in those jurisdictions.
Growing a private equity fund administration business is not just a case of renting an office and filling it with people. It requires a well structured, long term investment in people, time and resources to develop a professional work force that will continually meet the high standards demanded by private equity clients.
The continued growth of the outsourcing industry – and ultimately the private equity industry itself – depends on fund administrators making this commitment.