Global study by CSC reveals rising demand for third-party outsourcing of waterfall calculations

WILMINGTON, Del.--(BUSINESS WIRE)--The private markets industry is seeing a notable shift towards outsourcing services for distribution waterfall modeling and calculations, according to recent research by CSC among senior executives in the private capital industry and institutional investors.

The Distribution Waterfalls 2024: Transparency, Technology, Trust report by CSC1, a leading provider of tailored administration and strategic outsourcing solutions to alternative asset managers, surveyed 200 GPs and 200 LPs across North America, Europe, and Asia Pacific to understand their views on transparency and customization in waterfall calculations.

The findings reveal that nearly all LPs (92%) expect to see more GPs outsourcing waterfall modeling and calculations to specialist third parties over the next 24 months, with the vast majority of LPs (87%) far more inclined to invest with GPs that already do so.

"LPs want input from independent third parties who have the expertise needed to reduce the risk of an error and ensure accurate waterfalls calculations," says Silvia Tong, director of Fund Services, North Asia, at CSC. "Utilizing third-party providers can also reduce potential conflicts of interest, further increasing their appeal."

For GPs looking to maximize their competitive advantage, outsourcing appears to be a popular course of action. Three-quarters (75%) of GPs surveyed say they plan to outsource more waterfall calculation services in the next two years, while only 17% plan to keep these processes in-house.

As GPs face increasing customization demands, outsourcing is expected to play a larger role in managing the growing complexities of waterfall arrangements.

"Waterfall provisions involve complicated calculations and legal matters, with each LP having unique terms based on the investment strategy and investor preferences," notes Alejandro Jr. Tan, senior manager of Fund Services, Jersey, at CSC.

"Outsourcing can play an important role in providing LPs with accurate, transparent, and objective information―enhancing performance, answering the growing pressure for firmer standards, and ultimately building stronger relationships and boosting investor confidence."

To receive a copy of CSC's Distribution Waterfalls 2024: Transparency, Technology, Trust report, contact Thomas Dalton at cscteam@citigatedewerogerson.com.

1CSC, in partnership with Pure Profile, surveyed 200 GPs and 200 LPs equally distributed between North America, Europe, and Asia Pacific in July 2024, to understand their views on transparency and customization in waterfall calculations.

About CSC

CSC is the trusted partner of choice for more than 90% of the Fortune 500, more than 90% of the 100 Best Global Brands (Interbrand), and more than 70% of the PEI 300. We are the world's leading provider of global business administration and compliance solutions, specialized administration services to alternative asset managers across a range of fund strategies, transactions involving capital markets participants in both public and private markets, domain name system management and digital brand and fraud protection, and corporate tax software solutions. Founded in 1899 and headquartered in Wilmington, Delaware, USA, CSC prides itself on being privately held and professionally managed for more than 125 years. CSC has office locations and capabilities in more than 140 jurisdictions across Europe, the Americas, Asia Pacific, and the Middle East. We are a global company capable of doing business wherever our clients are—and we accomplish that by employing experts in every business we serve. We are the business behind business. Learn more at cscglobal.com.

For more information:
Citigate Dewe Rogerson
Thomas Dalton
cscteam@citigatedewerogerson.com
CSC
Laura Crozier
PR Manager
laura.crozier@cscglobal.com
CSC News Room