Beyond Outsourcing: Building an Operating Model for Growth

Alternative credit managers spend most of their time on fundraising and investing, which is understandable, given that’s how they grow their businesses. Capital formation, origination pipelines, portfolio construction, risk management each receive plenty of person-hours’ worth of attention and scrutiny.

Yet one of the most important determinants of long-term success often receives fewer eyeballs in the early stages of a firm’s development: the operating model that supports the business.

For many emerging managers, operational structures are built around immediate needs. Functions are handled internally where possible, specialist providers are engaged as required, and processes evolve organically as the firm grows.

This approach is often practical and cost-effective during the launch phase but the problem that emerges down the road is that growth brings complexity. As assets under management increase, so too do investor expectations, reporting requirements, regulatory obligations, transaction volumes, and service provider relationships.

That makes the question of not ‘can a manager can support today’s business?’, it’s ‘is the operating model capable of supporting tomorrow’s?’

Growth Changes the Operational Equation

Alternative credit strategies are often operationally intensive. They frequently involve bespoke structures, ongoing borrower engagement, covenant monitoring, complex cash flows, and a wide range of fund structures. As managers launch additional vehicles, or onboard sophisticated, institutional investors (or both), operational demands increase significantly.

It’s important to make clear that these pressures are not always visible at first. A manager may successfully oversee a growing portfolio while operational teams work harder behind the scenes to keep pace.

But that’s when processes become increasingly dependent on key individuals and reporting cycles require greater manual effort. Information requests from investors take longer to fulfil, and coordination between service providers becomes more challenging. That’s a recipe for creating bottlenecks that distract senior management and investment professionals from their primary responsibilities down the road.

Beyond the Outsourcing Debate

Discussions around operations are often framed as a choice between building capabilities internally or outsourcing them to third parties.

In reality, the more important consideration is how the various components of the operating model work together. Most alternative credit managers rely on a network of specialist providers throughout the lifecycle of a fund. Fund administrators, legal advisers, compliance specialists, auditors, tax advisers, custodians, and banking partners all play important roles in supporting the business.

And there are plenty of good ones, which means that finding your supporting cast is not the hurdle.

The hurdle is coordinating them. When responsibilities are dispersed across multiple organisations, communication gaps can emerge. Information may need to be shared repeatedly, accountability can become unclear, and decisions may be delayed while different parties work through separate processes and priorities. As firms grow, these inefficiencies become increasingly difficult to manage.

Creating Capacity for Investment Teams

One of the most overlooked benefits of a well-designed operating model is the capacity it creates for investment professionals.

In many growing firms, senior portfolio managers and investment principals find themselves increasingly drawn into operational matters. Investor reporting queries, service provider coordination, fund documentation, onboarding processes, and administrative oversight can consume a significant amount of management time, and while each task may be relatively small in isolation, the cumulative impact can be considerable because every hour spent resolving operational issues is an hour not spent sourcing opportunities, managing portfolio companies, or engaging with investors.

A scalable operating model helps ensure that operational complexity does not expand in parallel with business growth. By establishing clear ownership, defined workflows, and effective oversight across service providers, managers can remain focused on activities that directly support performance and fundraising objectives.

Institutional Investors Are Looking Beyond Performance

As the alternative credit market matures, investors are increasingly evaluating operational strength alongside investment capability, particularly now, as media headlines in the past 12 months or so have highlighted – exaggerated? – some of the risks in the space.

Performance and risk, therefore, remain under a microscope, but institutional allocators also want confidence that a manager can support continued growth without compromising governance, reporting quality, or operational controls.

This is particularly evident during operational due diligence processes, where investors try and find holes in the infrastructure supporting your fund. Questions around oversight, reporting, service provider relationships, governance frameworks, and business continuity have become routine.

Building for the Next Stage of Growth

The most successful alternative credit managers tend to take a proactive approach to operational development. Rather than waiting for growing pains to emerge, they regularly assess whether their operating model remains aligned with the scale and complexity of their business, and they consider how effectively their entire operational ecosystem functions together.

As alternative credit strategies continue to grow in scale and sophistication, operational infrastructure will play an increasingly important role in supporting long-term success. Building an operating model for growth is not about outsourcing more functions or adding additional layers of administration; it is about creating a coordinated framework that allows investment teams, service providers, and operational specialists to work together effectively.

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Gregory Poapst is a Managing Partner at Fundviews Capital. Connect with him on LinkedIn here.

Fundviews Capital is a full-service end-to-end Fund Management Platform.  Our platform provides a complete end-to-end solution for asset managers or wealth managers to structure, launch, operate and grow their professional investment funds. You can launch a fund in a matter of weeks, not months, and with minimal capital outlay – not only reducing the risk of launching a fund but also maximizing your chance of success.  Once launched, you will find that a dedicated team of professionals is just a phone call or email away at all times, handling all aspects of the back and middle office for your fund.