Lift-Outs in Private Markets: A Strategic Path to Operational Excellence

Executive Summary

As private markets evolve, investment managers face mounting pressure to scale operations, meet complex investor demands, and maintain strict cost discipline. While traditional outsourcing has been a common solution, the lift-out model—where an entire internal operations team is transitioned to a specialist third-party provider—offers a more strategic and seamless alternative. This model preserves invaluable institutional knowledge while unlocking the scale, technology, and expertise of a dedicated partner.

This article explores the lift-out concept, its powerful strategic benefits, the common triggers that lead managers to consider it, and the best practices for successful execution across private equity, real assets, and private credit.

What Is a Fund Administration Lift-Out?

A lift-out is a strategic transaction that involves transferring a manager’s internal operations team—typically staff from fund accounting, investor reporting, and compliance—to a third-party administrator. The team becomes part of the provider’s workforce while continuing to service the original manager under a dedicated, long-term service agreement.

Unlike traditional outsourcing in private markets, which can create disruption and a loss of knowledge, a lift-out is designed for continuity. It builds upon the existing foundation of your trusted team, enhancing their capabilities with the provider's advanced technology platforms, global best practices, and deep talent pool.

This approach offers a fund administration lift-out solution that strengthens operational resilience and scalability.

Why Private Market Managers Are Turning to Lift-Outs

Managers are increasingly turning to lift-outs not just as a cost-saving measure, but as a proactive strategic decision and a form of back-office transformation that strengthens long-term operational resilience.

Strategic Drivers

• Focus on Core Competencies: A lift-out allows the firm's leadership to redirect valuable time and capital away from managing back-office functions and toward what they do best: investment performance and fostering LP relationships.
• Operational Continuity: It retains the trusted staff who already know your funds, investors, and processes, ensuring there is no disruption in investor servicing or reporting quality.
• Cost Optimisation: This model converts the fixed, and often escalating, costs of salaries, training, and benefits into a predictable, variable service fee, which can improve fund-level expense allocation.
• Access to Superior Technology: Managers gain immediate access to institutional-grade technology for automation, data analytics, and regulatory reporting without the significant capital expenditure of building or buying it themselves.

Common Triggers

Firms are often prompted to explore a lift-out by specific growth or inflection points, including:

• Launching new, more complex funds or expanding into new jurisdictions where operational requirements differ.
• Preparing for institutional investor onboarding, which brings heightened due diligence and reporting expectations.
• Responding to increasing regulatory complexity or addressing specific audit findings that reveal operational gaps.
• The need to rapidly and efficiently scale operations following a merger or acquisition

Asset Class Considerations

While the benefits of a lift-out are universal, the operational nuances vary by asset class:

• Private Equity: For PE managers, the challenge often lies in tracking complex fund structures, managing capital calls and distributions, and calculating intricate performance fees (waterfalls). A lift-out provides access to specialised platforms designed to automate these processes.
• Real Assets: This sector requires expertise in property-level accounting, asset-specific data aggregation for ESG reporting, and managing joint venture structures. A lift-out partner brings this specialised knowledge and technology.
• Private Credit: The operational intensity of private credit—with its frequent loan servicing, interest calculations, and complex covenant tracking—makes it an ideal candidate for a lift-out to a provider with dedicated credit platforms and expertise.

Best Practices for a Successful Fund Administration Lift-Out

A successful lift-out is a strategic partnership that requires careful planning and execution.

• Stakeholder Alignment: Engage your internal team early and transparently. Frame the lift-out as a positive career development opportunity that offers them a better growth path, which is crucial for ensuring buy-in.
• Thorough Due Diligence: Vet potential providers not just for their technology stack and regulatory expertise, but also for their cultural fit. Your team will be joining their firm, so a strong cultural alignment is essential for long-term success.
• Clear Service Level Agreements (SLAs): Work with your partner to define clear KPIs, reporting deadlines, and escalation protocols from day one. This ensures accountability and a shared understanding of what success looks like.
• Proactive Change Management: Communicate the strategy and its benefits proactively to both your staff and your investors. Emphasise the continuity of service and the enhanced capabilities to maintain trust and confidence throughout the transition.

Conclusion

Lift-outs are no longer a niche solution; they are a powerful strategic lever for private markets managers seeking agility, resilience, and operational excellence in an increasingly competitive landscape. By preserving the invaluable continuity of your trusted team while unlocking the scale and innovation of a specialist partner, the lift-out model offers a true "best of both worlds" solution for future-proofing your firm and enhancing operational efficiency for fund managers.

Contact us today to learn how Vistra Fund Solutions can support your fund’s growth and operational needs.

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