The Good Guys Company — Complete Content Index

By Mads Døssing, Platform Strategist at The Good Guys Company

Executive Summary

Profitability in Traditional Asset Management has declined, leading to a greater focus on Private Markets, which has led to intensified competition in a fundraising environment that is currently under stress from macroeconomic headwinds. So far, the bigger managers have been able to continue their growth, but the small- and mid-sized firms have begun to face challenges. This white paper explores how these managers can leverage artificial intelligence (AI) to enhance efficiency and gain a competitive edge.

The application of AI can help all types of Private Market Asset Managers. However, this paper focuses on the application for small and mid-sized firms as these are believed to be able to benefit the most by limiting the resource and scale gap they currently face compared to the bigger firms.

This white paper will highlight areas AI can help limit this gap and increase competitiveness of small- and mid-sized managers, particularly:

• Fundraising can benefit from AI by optimizing communication through detailed meeting preparation and actionable follow-ups, fostering more meaningful relationships.

• AI offers the potential to increase the efficiency of RFP and RFI processes, leading to a first draft substantially faster than what is currently possible.

• In research, AI can accelerate the analysis of both quantitative and qualitative data, facilitating more informed decision-making and improving the creation of compelling narratives for investors.

• AI can streamline the investment process by automating deal pre-screening, data extraction from virtual data rooms (VDRs), and the creation of investment committee (IC) memos, ultimately speeding up transaction execution.

Increased Competition in an Already Stressed Fundraising Environment

From 2007 until 2022, profitability in traditional asset management halved from 15 bps to approximately 8 bps. This decreased profitability of traditional assets over the last two decades has led to an increased focus on Private Markets as a way for asset managers to rejuvenate their revenue side. However, this move by traditional asset managers has led to a substantial increase in competition as both alternative and traditional managers conglomerate in the Private Markets space.

This increased competition comes at a time when the global fundraising environment is increasingly tough. Higher interest rates and economic uncertainty has driven an increased spread between buyers and sellers in the Private Market space, leading to a tougher exit environment where managers can choose to either hold their positions or exit at the cost of returns.

2024 marked the third consecutive year where capital raised as well as the number of fund closings decreased. During these years, the larger firms have managed to maintain momentum in fundraising while small- and mid-sized firms have been struggling.

The outlook going into 2025 was originally expected to be an easing up of the exit environment, which in turn could stimulate the fundraising environment, but so far this has not materialized due to geopolitical uncertainty. This means managers need to themselves find a way to entrench their market positions and position themselves for growth.

From what we have seen working with actors in the industry, the increased competition in the Private Markets space will lead to the long-term winners going in one of two directions:

1. Build a specialized alpha-generating firm that focuses on a single asset class (e.g. Private Debt) and build out a strong offering in this space with a tailored operating model.

2. Build a scale platform that can diversify across Private Markets (e.g. Private Equity, Real Estate, Private Debt etc.) and build out an operating model that can adjust and adapt to increasing complexity and different requirements.

The Simplified Core of Private Markets

As the fundraising environment continues to be under pressure from macroeconomic headwinds and geopolitical uncertainties, Private Market managers need to increase their strength in core business functions (raising and deploying capital).

In a simplified manner, one can say that by increasing the ability to consistently raise capital and deploy raised capital, a manager can grow their existing funds while maintaining the fund's top performance. Thereby, strengthening these parts of the business is a priority, no matter if you seek to build a specialized alpha-generating firm or a scale platform.

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Raising Capital: Fundraising

Raising capital for new vintages of fund families as well as initiating new mandates can be conglomerated under the umbrella of the fundraising function. In the fundraising universe managers can choose to prioritize different types of Limited Partners (LPs) such as institutional clients (e.g. pension funds and sophisticated single-family offices), where issuances of RFPs and RFIs are common practice, or private wealth clients (e.g. multi-family offices and UHNW), which tend to be more relationship-driven. Strengthening your fundraising capabilities can be done either by hiring additional staff or augmenting the existing staff with tools to make their work more efficient and higher quality.

Deploying Capital: Investment Management

Deploying capital for both funds and mandates can be conglomerated under the umbrella of the investment management function. The investment management function covers research, origination as well as due diligence, execution and monitoring of investments. A key part of building a scalable Private Markets manager is ensuring you have strong origination capabilities (extensive pipeline of top opportunities) as well as the transaction engine to execute on the opportunities in a timely manner.

You can build a strong origination network by hiring senior professionals and a strong transaction engine either by having a substantial bench of more junior staff or augmenting existing staff with tools to make their work more efficient and higher quality.

The Need for Efficiency in Core Business Functions

Based on the high-level descriptions in the previous sections, it is possible to separate the fundraising and investment management functions into a total of 4 capability focus areas. Shared among these areas is the need to process large amounts of historical data, whether it be previous meeting notes, previous RFP/RFI responses as well as internal unstructured data, quantitative and qualitative research data or unstructured data from a Virtual Data Room (VDR).

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When looking at fundraising and investment management functions, based on our discussions with managers and emerging as well as leading service and tech providers, we have highlighted the AI potential as well as the barriers of adoption for each area.

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This is where Artificial Intelligence (AI) comes into play. The concept of AI is not a new invention. It has however, seen new business applications emerge after the emergence of Large Language Models (LLMs) and more recently, AI agents and Retrieval-Augmented Generation (RAG).

The ability to process and interact with large swathes of both quantitative and qualitative data creates the opportunity to augment existing human teams with a data analysis engine that improves continuously. This presents an interesting opportunity for Private Market managers, who operate in a space where human employees are expensive to employ and you want to extract the maximum amount of value from each employee.

The application of AI can help all types of Private Market Asset Managers. However, this paper focuses on the application for small and mid-sized firms as these are believed to be able to benefit the most due to the resource and scale gap they currently have compared to the bigger firms and the ability for AI to reduce this resource and scale gap.

Example AI Use Cases: Relationship Management & Fundraising

Relationship management and fundraising in Asset Management in general, but especially in Alternative Investments, is a constant roadshow game, where business development and senior investment professionals are almost constantly on the road visiting prospects and maintaining relations to existing LPs.

CRM systems have existed for a long time and today it is normal for fundraisers to have constant access to their CRM on both their laptop and smartphone. However, with the constant meetings with different people as well as the many different emails that are sent out on a daily basis, it can be difficult to stay on top of it all and not mix different interactions together. This is an interesting use case for AI to assist fundraisers in preparing for meetings by analyzing previous touchpoints as well as draft emails. Many CRM systems have begun to roll out AI agents that function almost as a personal assistant to the fundraisers, which is a promising way of providing high-touch solutions to LPs in an efficient and more scalable way than previously thought possible.

The benefits here are focused on enabling stronger relationships and better business outcomes as fundraisers would be better prepared for meetings and would have more accurate responses with faster response times leading to more effective and efficient building of relationships.

Example AI Use Cases: RFP & RFI Processes

Especially asset managers dealing with a more institutional LP segment will understand the pain of RFIs and RFPs in today's market environment. The tricky part about institutional RFIs and RFPs is that they vary substantially in content asks from institution to institution (even though many questions will be repeats). This also means automating workflows previously have been a challenge for managers.

The writing up of Due Diligence Questionnaires (DDQs) as well as the substantial amount of data that has to be gathered from all parts of the business to respond to an RFP is a herculean task for many managers.

Additionally, this area is an often-ignored use case compared to the more "attractive" AI topics like deal screening and financial modelling automation. However, this is one of the topics where substantial human resources could be freed up across the entire organization (front-to-back) by implementing AI solutions to efficiently gather inputs and prepare initial draft response packs to RFIs and RFPs.

AI can significantly reduce the time it takes to send a first draft of an RFP/RFI response for internal review. This solves the initial hurdle of gathering data as well as overcoming the "blank page" or copy-pasting from previous responses.

Example AI Use Cases: Research & Origination

Research is a core part of the Private Markets business. Not only is it used for commercial due diligence purposes, but it is also used as a powerful marketing tool and as a way to stay relevant in an increasingly content-driven world, where managers constantly compete for the eyeballs and attention of LPs.

The entire research process is built around analyzing large amounts of both quantitative and qualitative data such as traditional and alternative market data, news articles etc. Today, these workflows are usually handled by human employees who perform the analysis (sometimes augmented with statistical tools and code scripts) and draft the research papers.

AI solutions today can be used to increase the efficiency of the data gathering and analysis work compared to historical solutions like Python scripts, VBA macros, and close study of white papers and articles. We are not talking about replacing employees but making the employees more efficient and increasing actionable output.

AI can be used to drive higher quality commercial due diligence as well as thought leadership due to the increased quantity of both quantitative and qualitative data that can be processed. This can in turn lead to either better decision making when pursuing investment opportunities as well as create more engaging content for LPs.

Example AI Use Cases: Investment Process

The Private Market investment process is dependent on a pre-screening process based on a number of high-level investment criteria. Any opportunity that passes this initial screening is usually funnelled into a due diligence phase, which relies on substantial amounts of human effort as junior staff will fetch and structure data from the VDR and plug it into their financial model templates to calculate the attractiveness of said opportunity. If an opportunity shows promise, it might be shown at the investment committee meetings multiple times. Each time requires a memo to be drafted, another human-driven process.

Today, these processes from screening to IC are largely dependent on deal team members pulling long hours to perform manual workflows that in themselves do not add much value. And in certain cases (like an opportunity with a short transaction window), the ways of working today forces employees to "burn midnight oil" as a way of getting the job done. Not because of the value-add but because of the lack of proper tools to execute on transactions fast.

In the increasingly competitive Private Market industry, having an efficient transaction engine is key, and to achieve this, multiple buy-side houses are already exploring AI technologies to augment their teams and sometimes even automate certain workflows in the investment process. Everything from automatic pre-screening of deals to fetching and structuring data from VDRs to drafting of IC memos, the applications for AI in the investment process are many. This is one of the concrete opportunities for small and mid-sized firms to close the efficiency gap to the larger managers.

AI can significantly reduce the effort of deal team members across the entire investment lifecycle from pre-screening to VDR data extraction to due diligence and IC approval. The efficiency gain can be used to scale the transaction engine and in turn enable the raising of bigger funds while retaining key talent.

Looking Ahead

If you are interested in learning more about how to define a long-term strategy, future-proof your operating model or implement AI tools into existing use cases, reach out to us at The Good Guys Company (TGGC). We provide you with independent, hands-on buy-side experience as well as exposure to a broad network of leading and emerging tech and service providers.

By Dreyfus Banquiers & The Good Guys Company from the Swiss WealthTech Landscape Report

Edward Turner, Client Adviser at Dreyfus Banquiers, and Christian Cebreros, Managing Partner at The Good Guys Company, introduce the client experience section by exploring technology's evolution and today's offerings to identify how it can support future client experience.

Within the wealth management community, conversations frequently revolve around the concept of enhancing the client experience, with much speculation about its future. However, at its core, the essence of what constitutes a good (or even great) client experience remains unchanged. So, what has happened?

Firstly, the increasing complexity of the global financial services industry, with its flood of information, regulations, and a plethora of products and services, has overshadowed and diluted the essentials that truly matter. Secondly, client expectations have been significantly shaped by the entertainment industry. We have become accustomed to immediate gratification and to the allure of engaging digital experiences, often desiring things we had not even realised we wanted and perhaps did not even need.

As a result, the vision for the future of client experience in wealth management is often portrayed as a cornucopia of exhilarating possibilities akin to the offerings of Netflix and TikTok. This ideal service is envisioned as all-knowing and driven by algorithms, capable not only of responding to clients' inquiries preemptively but also of revealing unexpected insights that clients had not considered. Some might call it the WealthTech dream.

Yet, is this really the future? Or does the future lie maybe in the past? It is worth considering how technology can help us recapture the elements we have lost to complexity and, thus, augment the client experience to match evolving, not new, client expectations.

Indeed, the path to transforming client experience lies in five fundamental cornerstones, each overlapping each other and each being pivotal to adapting and meeting the heightened expectations of today's clients.

The Human Touch

Overshadowed by the demands of paperwork and the complexity of modern financial landscapes, the human element has increasingly taken a backseat. This shift has made an impact on the depth and quality of client relationships. Moreover, the evolving expectations of clients to have their needs anticipated, sometimes even before they fully recognise them as needs themselves, adds another layer of complexity. This is about seeing the client as a whole, beyond numbers in a portfolio, recognising the client's unique traits and aspirations and paving a path towards their lifetime financial goals. Using tools that will relieve the administrative burden to make time for meaningful dialogue and that capture the client story perfectly to convey a feeling of being seen, heard and fully understood will be key to reclaiming the human aspect of the client-adviser relationship.

Trust — Reputation, Security, and Independence

In a world where clients are increasingly wary of data breaches and privacy concerns, trust is paramount. The WealthTech industry can learn from technology platforms, which have earned user trust by ensuring security and avoiding spam or viruses. This trust extends to the use of third-party suppliers, advocating for open architecture, and fostering independent networks. The key is to offer flexibility of choice while ensuring security and reliability. To do so, the capacity to integrate reliable and validated third-party providers is central.

Client Communication

Over the years, there has been a significant shift in client communication in wealth management — from providing relevant and targeted information — to an overwhelming deluge of data. This flood of information, often lacking in personalisation and relevance, has obscured the valuable investment insights that clients truly need. The key challenge now is to reclaim the essence of what was once a more focused exchange: delivering pertinent, valuable information that resonates with each client.

Products, Advice, and Content

In the age of information overload, cutting through the noise is essential. Clients expect specific, personalised, and timely advice that makes use of the wealth of data at our disposal. This involves striking while the iron is hot — providing proactive advice at the right moment, tailored to the individual's current circumstances and future aspirations. It is about curating content that addresses their current queries and guides them towards financial decisions they had not yet considered, perhaps for the longer term. In addition, wealth management needs to provide a wider range of solutions through an open architecture. Ultimately, it is essential to be specific, personalised, and proactive. Simplifying the number of touchpoints where possible is key to ensure a frictionless and rich client experience and to ensure decisions taken actually deliver value.

Data — Knowledge is Power

The cornerstone of modern WealthTech is data. Essential to understanding client details, financial markets and relevant fiscal and legal matters impacting decision-making for clients and their advisers of choice.

Yet data is more than numbers; it is a window into client behaviours and market movements. This knowledge empowers wealth managers to develop informed, implementable, and value-adding recommendations. It marks the start of a journey where technology, personalisation, and market insights converge to enhance wealth management beyond mere portfolio management.

Each of the pieces that follow examines the five elements more closely, shedding light on just what makes a good client experience and how technology underpins and enables the delivery of a great client experience, which has, of course, the potential to positively impact the top line.

By The Good Guys Company from the Good Weekly Report

Christian Cebreros and Charles-Edmond Renouard, Managing Partners at The Good Guys Company, together with Mads Døssing, Platform Strategist at The Good Guys Company, discuss key considerations in times of market volatility.

The past week's significant market movements have sent asset and wealth managers across EMEA scrambling to address client concerns. While the market commentary is best left to economists, these volatile conditions illuminate critical operating model and product design considerations for firms seeking to strengthen their positioning during market stress.

Product Shelf Architecture: Liquidity Tier Optimization

Large Cap Product Considerations

This week's volatility has exposed structural gaps in many firms' product shelves. Asset managers with rigid product architecture face challenges in repositioning as sector rotations accelerate. Our operating model assessments reveal that firms with modular product design capabilities can respond faster to changing market dynamics.

Several wealth management clients have identified specific operational bottlenecks during this period. Client reporting systems designed for quarterly cycles struggle to provide the real-time transparency that high-net-worth clients expect during volatility. Technology infrastructure optimization becomes particularly relevant when market dislocations trigger heightened client engagement.

For product development teams, this correction highlights the need for embedded risk scenario capabilities within standard reporting frameworks. Firms with operating models that separate risk analytics from client communication channels face significant manual intervention requirements during market stress.

Small and Mid Cap Structural Considerations

Small and mid-cap focused offerings present unique operational challenges during volatility. Asset managers with fragmented middle-office infrastructure report longer processing times for smaller-cap transactions, creating potential settlement risks as volumes increase.

Data architecture limitations become particularly apparent in small-cap strategy operations. Many wealth platforms lack the taxonomic sophistication to properly segment small caps by revenue exposure characteristics — a critical capability when tariff impacts create dispersion within market cap bands.

Firms implementing unified data models across market cap spectrums report faster response times to client inquiries during market disruptions. This operational efficiency directly impacts client retention metrics during periods of heightened service expectations.

Private Market Operating Model Adaptations

The recent correction underscores significant operational challenges for firms offering private market products. Valuation infrastructure designed for quarterly cycles faces substantial pressure when public markets move rapidly, creating potential misalignment between public and private representations in client portfolios.

Asset managers with integrated valuation functions report higher client satisfaction scores during market corrections compared to those relying entirely on third-party administrators. This operational capability becomes particularly relevant for wealth managers serving sophisticated clients who understand valuation lag dynamics.

From a technology perspective, this volatility highlights the importance of scenario modeling capabilities for private market allocations. Firms with siloed systems separating public and private analytics struggle to provide coherent portfolio perspectives during market disruptions.

Client communication protocols represent another critical operational consideration. Wealth managers with standardized playbooks for addressing private market valuation during volatility report lower client query volumes and significantly reduced advisor stress.

Digital Asset Infrastructure Requirements

Recent market movements have exposed operational vulnerabilities in digital asset offerings. Custody and settlement infrastructure designed for lower volumes face significant strain during volatility spikes, creating potential service disruptions for wealth clients.

Technology architecture decisions become particularly consequential in this asset class. Firms relying on separate systems for traditional and digital assets struggle to provide unified client perspectives when correlations shift rapidly. Integration capabilities become critical differentiators during periods of heightened client engagement.

Risk management operating models face particular challenges with digital assets during corrections. Standard VaR frameworks designed for traditional asset behavior produce misleading outputs when applied to digital assets' unique volatility characteristics. Firms with unified but configurable risk engines demonstrate superior client servicing capabilities.

Operational Efficiency Priorities Moving Forward

This market correction offers three actionable operational priorities for EMEA asset and wealth managers:

First, evaluate client communication infrastructure for real-time capabilities. Firms with integrated CRM and portfolio management systems demonstrate faster response times to client inquiries during market stress. This operational efficiency directly impacts retention metrics.

Second, assess middle-office scalability under volatility scenarios. Transaction volumes typically increase 300–400% during market corrections, exposing operational bottlenecks in trade processing and reconciliation functions. Cloud-native operating models demonstrate superior adaptability to these volume spikes.

Third, prioritize data model integration across asset classes. Firms with unified taxonomies spanning traditional and alternative investments provide more coherent client perspectives during market dislocations. This capability becomes particularly relevant as correlations shift unexpectedly.

Advisory Considerations for Client Organizations

For wealth management organizations, this market correction presents a critical opportunity to evaluate advisor support infrastructure. Firms with centralized market intelligence functions report higher advisor confidence scores during periods of heightened client engagement.

Product specialists integrated within advisory teams become particularly valuable during corrections. Operating models that separate product expertise from client-facing functions create information bottlenecks when market movements trigger sophisticated client questions.

Technology enablement represents another crucial consideration. Wealth platforms with configurable stress testing capabilities allow advisors to demonstrate portfolio resilience under various scenarios — a critical client confidence tool during uncertain markets.

At The Good Guys Company, we remain focused on helping asset and wealth managers optimize their operating models and product architectures to navigate these challenging conditions. While we don't provide market predictions, our operational expertise helps firms build the resilient infrastructure necessary to support clients through all market environments.

By The Good Guys Company, with Andrea Sturm (J.P. Morgan) and Christian Cebreros (TGGC)

The Swiss financial hub won't be able to avoid the prevailing trend worldwide towards ever-higher transaction speeds and frequencies for much longer. In August, for example, the Swiss National Bank (SNB) will force banks to complete payment and settlement between two parties in ten seconds, instead of overnight or within two working days.

Shortened Settlement

The SNB's so-called Instant Payments standard is very relevant for the public at large and retail banks. But beyond that, domestic private banks, and wealth and asset managers have another key milestone looming on the horizon. From 28 May onwards, Swiss financial institutions will have to keep to T+1, a shortened settlement cycle, when trading US, Canadian and Mexican equities.

The term is short for trading date plus one working date and it is a US-driven impetus to shrink the current T+2 settlement requirements currently in force in most markets in the world by half.

Why the SEC Pushed for T+1

The US Securities and Exchange Commission (SEC) drove the initiative in response to the turmoil during the meme-stock episode of 2021, when significant trading restrictions and liquidity shortfalls exposed weaknesses in a T+2 world. A shorter cycle reduces the window for counterparty default, credit risk, and speculative attacks — ultimately making markets more stable and efficient. Faster cash recycling also strengthens overall market liquidity, allowing participants to deploy capital more productively.

No Avoiding It

The shift is an eminently important one for Swiss finance given that it traditionally has had large numbers of international clients in its wealth management businesses. Beyond that, the proportion of US shares in the MSCI World is currently at 70 percent, with 40 percent of securities worldwide listed on the index. That means that Switzerland, as a key offshore hub, won't be able to avoid complying with it.

Significant Change

Observers are becoming alarmed. It is only dawning on most in the financial sector that a very significant change looms ahead. As Andrea Sturm, head of J.P. Morgan's securities services business for Switzerland and neighbouring German-speaking countries, put it: "Many Swiss players haven't yet noticed that T+1 is going to be an issue for them." She and her team have been helping local banks and intermediaries get up to speed before the deadline.

The Challenge for Counterparties

The sale of a security is not a simple transaction between buyer and seller. A trade involves several parties including intermediaries. Over two days before the trade is completed, everyone makes sure that everyone meets their obligations. The central counterparty is key to clearing any transaction. It acts as an intermediary and guarantees the smooth processing of the trade to both the buyer and the seller. That means it also assumes the counterparty risk. If one of the two parties can't meet their obligations within the specified two days, it acts as an insurance policy.

Higher Error Quotas

That is significant given that things can go wrong. The parties are often located in different time zones. There can be communications and liquidity issues. Currently, the error quota related to T+2 trades is about 5 percent and that is something the intermediaries can stomach. Players who are not prepared for T+1 could see that quota rise to as much as 20 percent.

Competitiveness at Risk

The domestic financial hub could see an erosion of its competitiveness. Intermediaries, custody banks, and US regulators wouldn't take substantial increases in error quotas for very long. Misstrades have to remain an absolute rarity as prevailing regulation wasn't written with the intention to make custodians and counterparties use their balance sheets as an intermediate financial backstop.

Being Locked Out

Intermediaries will start to charge higher interest rates on constrained capital as a first step. If Swiss players are chronically late with fulfilling their obligations, they run the danger of not getting the service required, or getting it for a significantly higher interest rate. At the end of the day, that means that they could end up being locked out of the largest securities market in the world.

According to an official survey, most are very behind with making arrangements. Half of them have said they haven't started preparing for T+1.

The European Dimension

The impact extends well beyond Switzerland. Pension funds, banks, and asset managers across Europe are particularly affected. The shorter settlement cycle puts immense pressure on processes and systems that were designed for T+2. European wealth managers and institutional investors must accept that the time available for problem-solving and error correction is being drastically reduced. The pressure to provide liquidity and securities on time rises significantly.

No Easy Solution

There is a great deal of work ahead. Private banks and smaller asset managers don't have night desks for trading and settlement. Given the time zone difference with the US, they would lose precious hours in a T+1 world. Besides that, most still have manual processes, which take up time.

There is no easy solution to the current conundrum. Every institution has to be looked at individually. It seems unavoidable that the sector will invest a significant amount of money to make the change. Outsourcing the process to specialists and mobilizing a night service will both prove expensive.

Canceled Vacations

But that is still likely to be much cheaper than paying late dues and interest en masse while irritating clients. J.P. Morgan, which also serves as a settlement intermediary, is hoping that banks will start to react more quickly as the deadline approaches. "We don't want to have our Swiss clients left behind," Sturm says. But she is also preparing for the eventuality that many domestic players won't be ready in time. "I have provisionally asked my team to cancel any vacations in June," the well-versed banker indicates.

By The Good Guys Company

Christian Cebreros and Charles-Edmond Renouard, Managing Partners at The Good Guys Company, together with Mads Døssing, Platform Strategist at The Good Guys Company, and TGGC's senior advisory discuss key themes for 2025 affecting Asset and Wealth Managers.

The EMEA asset and wealth management sector faces a complex convergence of technological disruption, regulatory pressures, market volatility, and evolving client expectations. C-suite leaders grapple daily with balancing operational efficiency against demands for personalized solutions, while navigating ESG complexities and private market expansion. Success requires rethinking operating models through intelligent automation, agile compliance frameworks, and hyper-personalized digital engagement strategies.

Technological Disruption and Workforce Transformation

Artificial Intelligence as Both Catalyst and Competitive Threat: Asset managers report significant employee use of AI tools for tasks ranging from risk modeling to client communication automation. However, projected adoption jumps create daily pressure on COOs to reskill teams while avoiding operational fragmentation. A key concern is balancing AI's efficiency gains against emerging risks like over-reliance on black-box algorithms for portfolio decisions.

Weekly tracking of AI governance frameworks becomes critical, particularly as regulators like the European Securities and Markets Authority (ESMA) propose strict transparency requirements for machine learning models in investment processes. Forward-looking firms now allocate 12–15% of IT budgets to explainable AI systems that maintain human oversight loops.

Cybersecurity Vulnerabilities in Hybrid Operating Models: With the majority of wealth managers ranking digital risks as their top operational concern, daily security briefings now focus on attack vectors introduced by cloud migration and third-party data integrations. CIOs prioritize zero-trust architectures, but face challenges implementing them across legacy systems still handling a significant portion of back-office transactions.

Regulatory Compliance and Tax Complexity

Real-Time Adaptation to Fiscal Policy Shifts: The OECD Global Minimum Tax implementation triggered dozens of regulatory updates across EMEA jurisdictions, forcing daily recalibration of cross-border wealth structures. COOs report dedicating substantial operational capacity to tax documentation, with penalties for non-compliance increasing significantly.

Weekly monitoring of legislative drafts is essential, particularly regarding proposed digital asset reporting rules under MiCA 2.0 and sustainability disclosure alignment between SFDR and ISSB standards. Firms using regulatory technology (RegTech) solutions reduce compliance costs significantly compared to manual processes.

ESG Reporting Fragmentation: Despite firms frequently citing ESG as a boardroom topic, diverging regional standards create daily reporting headaches. The EU's Corporate Sustainability Reporting Directive (CSRD) requires data points not mandated by UK SDR, forcing dual reporting frameworks for pan-European managers. Technology partnerships with index providers offering ESG analytics integration have become critical.

Market Dynamics and Investment Strategy Pressures

Volatility Management in Equities-Fixed Income Correlation Breakdown: The traditional 60/40 portfolio's effectiveness has diminished, with bond-equity correlation turning positive during rate hike cycles. Daily risk committee meetings focus on tail-risk hedging using derivatives overlays, while firms increasingly allocate to private credit strategies for diversification.

Weekly liquidity stress tests are mandatory given client redemption pressures during periods of banking sector volatility. Direct indexing adoption has grown significantly year-over-year as a tool for customized tax-loss harvesting.

Private Markets Integration Challenges: While firms broadly view private markets as an expansion opportunity, operational hurdles dominate COO agendas. Daily challenges include manual NAV reconciliation processes consuming significant middle-office resources, lack of standardized ESG metrics for private equity holdings, and liquidity mismatches causing cash drag in evergreen funds.

Client-Centric Operating Model Evolution

Hyper-Personalization at Scale: High-net-worth individuals demand real-time portfolio customization, with many expecting same-day implementation of thematic investment requests. This forces wealth managers to adopt microservices-based architecture, enabling modular product assembly. AI-driven client segmentation tools now process far more behavioral data points per investor than just a few years ago.

Generational Wealth Transfer Readiness: With substantial European assets shifting to millennials in the coming years, daily client meetings increasingly focus on digital engagement preferences. Heirs under 40 demand mobile-first interfaces with sophisticated portfolio visualization, pushing firms to overhaul legacy CRM systems.

Strategic Consolidation and Partnership Landscapes

M&A as a Capability Acceleration Tool: The European "barbell effect" sees mid-sized managers increasingly acquired by larger players seeking technology scale. Daily deal pipeline tracking is crucial, with valuation multiples focusing on proprietary data assets and AI capabilities.

Ecosystem Partnership Strategies: Forward-thinking CIOs now allocate significant budgets to fintech co-development partnerships, particularly in quantum computing risk modeling and tokenization platforms.

Conclusion: Building the Cognitive Enterprise

EMEA asset and wealth managers must prioritize three daily imperatives to maintain relevance:

1. Operational Intelligence — Embedding AI/ML across middle/back offices while maintaining audit trails for regulatory scrutiny

2. Client Genome Mapping — Leveraging predictive analytics to anticipate individual investment preferences and life-stage needs

3. Regulatory Foresight — Establishing real-time policy monitoring hubs with automated impact assessment frameworks

By transforming operating models into agile, data-centric ecosystems, EMEA managers can turn existential threats into sustainable competitive advantages. The firms thriving in 2025 will be those treating operational excellence not as a cost center, but as the foundation for investment innovation.

By The Good Guys Company and Lamb Quantitative Research

Christian Cebreros, Managing Partner at The Good Guys Company, together with Mads Døssing, Platform Strategist at The Good Guys Company, Andreas Merbecks, Senior Advisor to The Good Guys Company, and Alistair Lamb, Researcher at LambQR, discuss the developments of the Asset Management industry with a focus on the Swiss industry.

Swiss Asset Managers' Global Market Share Declined

In the evolving landscape of global finance, the Swiss financial industry, together with its Asset & Wealth Management sectors is presumed to be strong. Novel developments over the past decade, however, demand a reexamination of this presumption, and a check on the health of Swiss Asset Management, and its place on the global competitive stage.

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The global industry experienced remarkable growth in assets under management (AuM) from 2012 to 2022. Switzerland participated in this global trend: Swiss Asset Managers' AuM increased by an impressive USD 1 trillion during this period, which corresponds to a 46% growth rate. Yet, in the midst of this growth, potential challenges are also present, in particular, when comparing the Swiss Asset Management industry with its North American and European peers. An initial finding that sparked this analysis was: despite the substantial growth in Swiss AuM, the market share of Switzerland within the global landscape has contracted, slipping from 3.1% in 2012 to 2.8% in 2022. This drop of 12% compels us to reflect on the global industry dynamic that predicated this change, and whether Switzerland is positioned to remain a relevant player in the years to come.

This white paper is a collaborative endeavour that draws upon our internal industry experts and leverages a strategic partnership with the quantitative research house, Lamb Quantitative Research. Together, we aim to provide a comprehensive view of the Swiss Asset Management landscape, offering an objective assessment of the current state of Swiss Asset Management in the global industry.

Market Returns are the Most Important Driver for Growth

The first section conducts a comparative analysis of AuM growth. A closer look at the three components of AuM growth: net flows, market returns, and M&A across North America, the European Union, and Switzerland.

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The Role of Net Inflows: Swiss inflows keep pace with North America, outpacing Europe. Over the past decade (2012–2022), net inflows represented an impressive 30% of Swiss Asset Managers' cumulative AuM growth. This is well above the 17% contribution net inflows made to European managers' AuM growth, and marginally exceeds the 28% contribution of net inflows to North American managers' growth.

The Impact of Market Returns: Market returns of Swiss managers lag those of their North American counterparts. During the 10-year period, Swiss Asset Managers saw a modest 1% contribution to AuM growth from market returns. This is flagging significantly behind the 33% contribution of market returns to North American managers' AuM growth.

The Quiet Role of M&A Activity: For Swiss managers, M&A activity has contributed 2% to its AuM growth from 2012 to 2022, compared to North American managers' 9% and European managers' 4%.

When reflecting on the three sources of growth, we conclude that poor market returns compared to those of North American managers is a critical factor in the Swiss managers' loss of market share on the global stage.

Deeper into the Market Return Factor

Asset Class Preference — Equity vs. Fixed Income: North American managers have thrived on equity returns, harnessing the benefits of this high-return asset class. In contrast, Swiss and European counterparts have had much higher exposure to fixed income, resulting in lower volatility but also lower returns.

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The 'Home Bias' Phenomenon: Swiss and European managers manifest a bias for domestic investments, which has further reduced their market returns relative to their North American peers. This is because Swiss and European equities and fixed income have had lower returns compared to their respective North American equivalents.

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Both asset class allocation and home bias within each asset class have clearly detracted from Swiss asset managers' potential AuM growth.

Declining AuM Margins and the Focus on Alternatives

The trend is clear: AuM margins are on a consistent decline across all regions, with a global average of -3.2% per annum.

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Against this backdrop of diminishing margins, the growth in AuM remains a powerful counterbalance. Thus, managers have still achieved revenue growth, averaging 2.5% per annum globally.

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A novel, highly relevant structural market phenomenon: the global industry exhibits decreasing returns to scale of AuM margin. The higher a manager's AuM, the lower the AuM margin. This counterintuitive trend challenges long-held beliefs about the economies of scale in the Asset Management industry.

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Swiss Alternative Management Success and Traditional Challenges

While alternative managers have experienced a decline in AuM margin from 183 basis points in 2012 to 83 bps in 2022, these remain far higher than the AuM margin of traditional managers, which averaged 27 bps.

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The Swiss alternative management landscape is characterized by the existence of a single, dominant player. Other Swiss managers offer products in the alternatives space but have not enjoyed the same success. Simultaneously, revenue growth for Swiss traditional managers is lower even than their European peers and is effectively flat since 2012.

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The shift towards alternatives has coincided with a smaller growth rate of allocation to fixed income. This has been driven in part by low and negative real returns of fixed income products, but this trend may unwind somewhat in the current high-interest-rate environment.

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Conclusion: Observing a Decade in Swiss Asset Management

Market Share Dynamics: Swiss Asset Managers' market share of global AuM decreased, seeing a decline of 12% from 2012 to 2022 despite a 46% growth in AuM.

AuM Growth — Balancing Act: Swiss Asset Managers had strong net inflows, beating their European peers but trailing North American peers. Market returns emerged as a challenging arena with a modest 1% contribution, in stark contrast to North America's 33%.

Revenue Landscape: North American managers experienced higher revenue growth. Swiss managers transitioned at a slower pace into alternatives, even as these investments proved lucrative amid a low-interest-rate environment.

Profitability Convergence: The apparent convergence of net profit margins of alternative managers to that of traditional managers raises important questions about the future profitability of alternative products.

This paper is a prelude to a longer journey. Subsequent papers will investigate the state of the Asset Management industry today and chart the path forward.

By The Good Guys Company

Christian Cebreros, Managing Partner at The Good Guys Company, explores the Outsourced Execution industry and market to help Asset and Wealth Managers understand the value of this external capability to their business and how to navigate the landscape of providers.

Introduction

The key differentiating activity of Asset Managers is their product offering and investment process. Once portfolio managers have decided in which instruments to invest, someone has to go to the market, assess which execution strategy is beneficial and buy that instrument at the best possible conditions. Enter the role of the execution desk.

Considering that running such a desk can cost £1.5m per year for a 3-person team (incl. comp, tech, terminals, data feeds, storage), it would cost the Asset Manager 10bps if he manages £1.5bn in assets. For smaller hedge funds and family offices, 10bps can be a prohibitive cost of execution.

And a 3-person desk very rarely has a multi-asset class capability and/or does it cover all time-zones.

Larger Asset Managers might be in the position to afford their own execution desk, but their desk may still not be large enough to compete with the execution capability (in terms of liquidity access, negotiation power, execution quality) of large asset managers or even outsourced execution providers. It could also be that their execution desk is not providing a clear contribution to performance or the Asset Manager's value proposition.

Should You Do It Yourself?

To answer this concretely, you have to answer the following questions:

1. Is your execution desk delivering alpha consistently for your products (and is that alpha obvious to the organisation)?

2. Is your execution desk creating added value that enables a unique product offering/supports your value proposition?

3. Is your AuM significant enough to justify the cost impact of running your own execution capability?

If the answers aren't obvious to you then you might benefit from outsourcing your execution capability.

If you cannot explain, and the organisation and its clients do not understand the current and future overall value of the internal execution capability, why should the company allocate resources to it? It will cost the company a great amount of resources to establish, run, and develop the execution capability to stay at least on par with the market.

Outsourcing Models

How exactly can Asset Managers benefit from delegating flow to third-party providers? These providers typically offer three models:

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1. Prime Services: You use the providers as brokers, leverage their market access, their broker network and expertise, asset class and time zone coverage, and they provide you anonymity since they face the street. Settlement is with the outsourced execution provider.

2. Supplemental Trading: You cover what provides added value to you and your clients in terms of asset class and/or regional expertise and supplement it with a third-party provider to enhance your asset class, time zone coverage, broker network and liquidity access, and market specific expertise at lower risk. This also strengthens your business continuity plans and reduces costs in areas where you don't provide significant added value. This can be done with the third-party team at the provider's locations or on client premise.

3. Fully Outsourced Trading: The provider typically uses his own technology, people, and processes, and investment managers connect via standard interfaces. This service would also typically include research, market color, execution quality analytics.

Common Concerns Addressed

How are conflicts of interest managed? Outsourcing providers know this is a sensitive topic. Their models are agency only, when belonging to a sell-side company they enforce strict Chinese-walls, and they offer toxicity analysis to prove low to no levels of information leakage.

What happens in a big market correction? This depends on the model you choose. If you have a dedicated desk assigned to you, then there is no difference to an internal desk. If you don't have a dedicated desk then it will be first-in, first-out.

Does the outsourcing provider accept fiduciary responsibility? The fiduciary responsibility remains with the Asset Manager. Nevertheless it is key to have governance processes to help enforce and hold the outsourcing provider accountable for delivering best execution.

Factors to Compare Providers

When evaluating outsourcing providers, consider: cost, service level, experience, liability, risk and quality of execution, depth of integration with portfolio managers, and depth of integration with your middle office.

We recommend starting with the providers' high-level offering to accelerate the screening process.

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Benefits of Outsourcing

• Leverage the economies of scale to access liquidity on the street • Anonymity to the street • Higher, inherited market power • Cost flexibility / ability to charge the fund • Time-to-market when expanding regional, timezone, asset class coverage • Overflow service when the internal desk has too many orders to manage • Reduction of regulatory burden and adaptation cost

Potential Caveats

• Losing market insights depending on the chosen model, especially in emerging markets • Little evidence on how the relationship would develop in times of market stress • The responsibility for Best Execution is still with the Asset Manager • If the business grows and the execution capability is to be in-sourced, the Asset Manager might not get the historical data with the required level of granularity • Unclear effectivity of IPO/New Issue liquidity access

Conclusion

If the positive contribution of the Asset Manager's execution capability is not immediately clear, it may be worthwhile to consider testing an outsourcing provider to complement the in-house execution desk. So far, most Asset Managers are opting for supplemental trading and not for full outsourcing. If your in-house desk is a strategic capability because it allows a unique product offering or delivers superior performance enhancement, then outsourcing your execution would be a business continuity solution at best.

The TGGC Outlook

We believe that outsourced execution providers will consolidate in the coming years, resulting in large, very professional execution agents who will make it more and more difficult to justify running your own execution desk. They will cover processes linked to execution — trade processing, securities operations, collateral management, repo, trade surveillance, regulatory reporting — and will be able to provide deep data analytics and very high levels of automation.

By The Good Guys Company

Executive Summary

In Q1 2026, over $4.6 billion in investor capital became trapped behind withdrawal limits across major private credit funds. Apollo, Ares, Blue Owl, Morgan Stanley, and Cliffwater have all capped or restructured redemptions. The U.S. private credit default rate has climbed to 5.8%, and redemptions as a share of NAV nearly tripled quarter-over-quarter in late 2025. What began as isolated concern around software loan markdowns has become the asset class's first systemic liquidity test at scale.

This paper argues that the current private credit redemption crisis is not merely a market dislocation. It is a structural re-enactment of the dynamics first formalised by Douglas Diamond and Philip Dybvig in their 1983 paper on bank runs. The parallels are precise and instructive. In both cases, an intermediary transforms illiquid long-duration assets into short-duration liquid claims, creating inherent fragility that depends entirely on confidence to remain stable.

The paper draws three sets of conclusions. First, it maps the Diamond-Dybvig framework onto the architecture of semi-liquid private credit vehicles and identifies where the analogy holds and where it breaks. Second, it assesses the impact on investors, distinguishing between those locked in current structures and those positioned to deploy capital opportunistically. Third, it argues that the crisis reveals a deeper structural truth: that the operating model of the fund manager is the primary mechanism through which liquidity risk, valuation integrity, and investor confidence are either maintained or destroyed.

1. The Diamond-Dybvig Framework

The 1983 Diamond-Dybvig model, for which Douglas Diamond received the Nobel Prize in Economics in 2022, describes the fundamental instability inherent in any institution that transforms illiquid assets into liquid liabilities. The model is elegant in its construction: an economy with three periods, a long-term productive asset, and agents with uncertain liquidity needs.

1.1 The Model's Core Mechanics

In the Diamond-Dybvig setup, investors deposit funds at t=0 into a bank. The bank invests in a long-term asset that yields a superior return at t=2 but can only be liquidated at t=1 at par or below. Some depositors will need funds at t=1 ("early types"), while others can wait until t=2 ("late types"). Individual depositors do not know in advance which type they will be.

The bank creates value by pooling deposits and offering a demand deposit contract that pays more than liquidation value to early withdrawers (r1 > 1) while still paying a return to late withdrawers (r2), financed by the surplus from long-term asset returns. Under normal conditions, only genuinely early-type depositors withdraw, the bank holds sufficient liquidity, and the arrangement is welfare-enhancing for all participants.

1.2 The Two Equilibria

The model produces two Nash equilibria. In the first, confidence holds: depositors who do not need immediate liquidity remain invested, the bank meets its obligations, and long-term assets mature at full value. In the second, confidence fails: depositors who would otherwise wait rush to withdraw because they believe others will do the same, forcing the bank to liquidate long-term assets at a discount, confirming the fears that triggered the run.

The run equilibrium does not require any deterioration in the underlying asset quality. It requires only a shift in expectations about other depositors' behaviour. The crisis is manufactured by the collective response to the fear of crisis.

1.3 Prescribed Remedies

Diamond and Dybvig identify two primary mechanisms to prevent runs. The first is suspension of convertibility: the bank halts withdrawals once a threshold is reached, removing the incentive to rush for the exit. The second is deposit insurance backed by a credible guarantor (typically the government or central bank), which eliminates the rational basis for panic by assuring depositors they will be made whole regardless of other depositors' actions.

Both solutions share a common logic: they break the strategic complementarity that makes withdrawal decisions interdependent. When each depositor's optimal action no longer depends on what others do, the run equilibrium dissolves.

2. The Private Credit Architecture

To apply the Diamond-Dybvig framework to private credit, it is necessary to understand the structural architecture of the vehicles now under stress. The private credit market has grown to approximately $2 trillion in deployed capital globally, with semi-liquid retail vehicles (non-traded BDCs, interval funds, evergreen structures) accounting for over $534 billion in AUM by year-end 2025.

2.1 The Maturity Transformation

The structural parallel to banking is direct. Private credit funds originate and hold loans to middle-market companies, typically floating-rate instruments with 3–7 year maturities, limited secondary market liquidity, and no continuous pricing mechanism. These are the illiquid long-duration assets of the Diamond-Dybvig model.

Against these assets, fund managers have issued semi-liquid liabilities: quarterly tender offers, periodic redemption windows, and NAV-based pricing that create the perception of liquidity for investors. The implicit contract is that investors can participate in private credit's yield premium without fully bearing its illiquidity cost. This is maturity transformation in its purest form.

2.2 The Irony of the Structure

Private credit originally emerged as the correction to the very asset-liability mismatch it now replicates. After 2008, as banks retreated from middle-market lending under regulatory pressure (Volcker Rule, Basel III/IV), alternative managers stepped in with a structurally sound proposition: raise committed capital from institutional investors who understood and accepted illiquidity in exchange for a yield premium.

As the asset class scaled, however, managers needed new pools of capital and found them in the retail and wealth channels. The mismatch migrated from bank balance sheets funded by deposits to fund structures supported by capital that expects periodic liquidity the underlying assets cannot reliably provide. The intermediary changed. The structural vulnerability did not.

3. The Run: Q4 2025 to Q1 2026

The sequence of events from late 2025 through Q1 2026 follows the Diamond-Dybvig dynamic with remarkable fidelity. What makes this episode instructive is that it began with a combination of fundamental credit concerns and expectation-driven contagion, making it simultaneously a solvency concern and a self-fulfilling liquidity crisis.

3.1 The Trigger Events

The initial catalyst was fundamental: the bankruptcies of First Brands and Tricolor in the U.S. auto sector in late 2025. While these failures were tied to asset-based finance rather than traditional direct lending, they forced a broader reassessment of loan quality across private credit portfolios. Simultaneously, software-as-a-service (SaaS) exposure, estimated at 20–30% of many private credit portfolios, came under pressure as agentic AI threatened the enterprise value of borrowers whose leverage had been underwritten during the low-rate era.

By early 2026, Morningstar DBRS found that credit ratings downgrades in private credit outnumbered upgrades by 3.3 times. The IMF had previously estimated that 40% of private credit borrowers carried negative free cash flow. The Morningstar LSTA US Leveraged Loan Index software segment lost 7.9% from its January peak through early March 2026.

3.2 The Contagion Sequence

The cascade from fundamental concern to systemic run proceeded through a recognisable pattern:

• Blue Owl attempted to merge its unlisted BDC (OBDC II) with its public counterpart in autumn 2025. The merger failed, exposing NAV/price mismatches and triggering redemption requests exceeding 15% of net assets from one tech-focused fund.

• In February 2026, Blue Owl halted quarterly tender offers for OBDC II entirely, replacing them with involuntary return-of-capital distributions. This converted a semi-liquid vehicle into an effective drawdown structure, unilaterally removing investor exit rights.

• In Q4 2025, redemptions as a share of beginning-of-quarter NAV in the non-listed BDC space nearly tripled to 4.71%. Among BDCs with over $1 billion in NAV, redemptions rose 217% quarter-over-quarter.

• Blackstone raised its BCRED quarterly redemption cap from 5% to 7.9% and deployed firm and employee capital to meet $1.7 billion in net withdrawals, avoiding a gate but straining its own balance sheet.

• In March 2026, Apollo gated its $25 billion ADS fund. Ares capped its $10.7 billion Strategic Income Fund at 5% after withdrawal requests hit 11.6%. Morgan Stanley and Cliffwater followed with their own caps.

• By late March 2026, Bloomberg reported over $4.6 billion in investor capital trapped behind withdrawal limits across the industry.

3.3 The Diamond-Dybvig Diagnosis

The critical observation is that much of this redemption activity was driven not by realised credit losses but by the fear of what other investors would do. Blackstone's BCRED had generated a 9.8% return since inception, and its president insisted portfolio quality remained solid. Yet the fund faced massive withdrawals because investors rationally concluded that being last in line for a limited redemption pool was the worst possible outcome.

The information asymmetry compounds the problem. Unlike publicly traded bonds, private credit loans are valued through appraisal-based, mark-to-model methodologies. Investors cannot independently verify whether NAV reflects reality. When JPMorgan marked down certain software loan portfolios and simultaneously reduced financing against them, it provided a public signal that internal valuations might be overstated. This is the Diamond-Dybvig information trigger: a credible signal that shifts expectations about asset quality, making the run rational even if the signal is only partially correct.

4. Where the Analogy Breaks

The Diamond-Dybvig framework illuminates the current crisis, but the analogy is not perfect. Three critical differences shape the dynamics in ways that make the private credit version both less systemically dangerous and more structurally intractable than a traditional bank run.

4.1 No Lender of Last Resort

Banks facing runs can access central bank liquidity through the discount window, emergency lending facilities, or deposit insurance funded by the broader banking system. Private credit funds have no equivalent backstop. The only substitute is the manager's own balance sheet (as Blackstone demonstrated) or fire sales into a thin secondary market. This absence means that the Diamond-Dybvig "good equilibrium" is harder to sustain because there is no external credible guarantor to anchor expectations.

4.2 Gates as Imperfect Suspension

Redemption gates are the private credit equivalent of suspension of convertibility. Diamond and Dybvig show that suspension can prevent runs by removing the incentive to rush for the exit. However, they also note that when the total demand for liquidity is uncertain, suspension is suboptimal. In practice, gates in private credit have the perverse effect of intensifying future redemption pressure: investors who are gated in one quarter submit larger requests the next, creating a queuing dynamic that can persist for years.

4.3 Blurred Solvency and Liquidity Lines

In the pure Diamond-Dybvig model, the run is a liquidity crisis affecting a solvent bank. In the current private credit episode, liquidity and solvency concerns are entangled. Rising defaults (5.8% by early 2026), the expansion of payment-in-kind arrangements, and growing use of "amend-and-pretend" tactics suggest genuine credit deterioration alongside the expectation-driven run. This muddies the diagnosis: investors cannot easily distinguish between a solvent fund facing a liquidity crunch and a fund whose assets are genuinely impaired.

5. Impact on Investors

5.1 Investors Locked in Current Structures

For investors trapped behind redemption gates, the consequences follow directly from the Diamond-Dybvig logic. When a fund sells assets to meet redemptions, it imposes a negative externality on remaining investors through three channels:

• Forced asset sales at discounts to NAV dilute the portfolio quality and returns for non-redeeming investors. Loans sold under pressure trade at discounts to their appraised value, crystallising losses that might never have materialised if the loans were held to maturity.

• If the manager borrows against credit lines rather than selling assets, the additional leverage increases risk for remaining investors without their consent, changing the risk profile of the fund post-hoc.

• The queuing dynamic means that even if underlying credit quality stabilises, the overhang of pending redemption requests can suppress NAV for quarters or years, as incoming cash flows are redirected to serve the queue rather than reinvested.

The distributional effect is asymmetric. Investors who redeem early (before gates are imposed) exit at full or near-full NAV. Those who remain bear the cost of supporting that liquidity. This is precisely the "first mover advantage" that creates the bank run equilibrium in Diamond-Dybvig.

5.2 Prospective and Opportunistic Investors

The crisis creates significant opportunities for investors with patient capital and strong analytical capabilities. These opportunities map onto three categories:

Secondary Market Acquisitions: Private credit secondary transactions are growing rapidly, with funds selling portfolio positions to specialised buyers at discounts to reported valuations. For buyers with the ability to underwrite individual loan quality, these discounts represent compensation for illiquidity and complexity rather than credit impairment. The secondary market for private credit is projected to grow from approximately 1% of industry AUM toward the 2–3% typical of private equity secondaries, representing a multi-billion dollar annual opportunity.

New Origination at Wider Spreads: As stressed funds reduce new lending activity to manage liquidity, the competitive intensity in private credit origination decreases. Borrowers who previously benefited from covenant-lite terms and tight spreads will face more demanding terms from the remaining lenders. Managers who maintained disciplined underwriting through the cycle are positioned to originate at historically attractive risk-adjusted returns.

Platform and Manager Selection: The crisis is creating a visible quality gap between managers. Those with robust operating models, transparent valuations, and genuine structural alignment between asset and liability duration will emerge with stronger franchises and lower cost of capital. Investors who can identify these managers early gain access to a structural premium that will widen as the weaker platforms lose their ability to raise capital.

6. The Operating Model as the Credible Backstop

Diamond and Dybvig conclude that preventing bank runs requires a credible external guarantor. In the absence of government deposit insurance or central bank facilities for private credit, the fund manager's operating model is the only available substitute. This is the paper's central strategic conclusion: operating model quality is not a back-office concern. It is the primary mechanism through which the "good equilibrium" of the Diamond-Dybvig model is sustained or lost.

6.1 Valuation Integrity as the Foundation of Confidence

In the Diamond-Dybvig framework, confidence depends on depositors' belief that the bank's assets are worth what the bank claims. In private credit, this translates directly to the valuation process. When investors cannot independently verify NAV, the manager's valuation methodology, independence, documentation, and consistency become the functional equivalent of the bank's capital adequacy.

The DOJ has publicly warned about "creative" marks and divergent valuation practices. The SEC is investigating ratings integrity in the space. Fund managers who treat valuation as a compliance exercise rather than a core operating function are structurally more vulnerable to expectation shifts. Best-practice managers maintain clearly documented methodologies, independent valuation committees, consistent treatment across portfolios, and defined escalation procedures for challenged credits.

6.2 Liquidity Management as the Suspension Mechanism

Diamond and Dybvig show that suspension of convertibility can prevent runs but only if the suspension threshold is correctly calibrated and the mechanism is credible. In private credit, this translates to the fund's liquidity management framework: the combination of cash reserves, committed credit facilities, asset sale capabilities, and redemption structures that determine whether and when gates must be imposed.

The difference between Blackstone's ability to meet all BCRED redemptions (through a combination of $8 billion in available liquidity and firm capital deployment) and Blue Owl's forced conversion of OBDC II into a drawdown vehicle is fundamentally a difference in operating model design. Blackstone built a liquidity architecture capable of absorbing stress. Blue Owl's architecture was reliant on continued subscription momentum to finance exits — a structure that fails precisely when it is needed most.

6.3 Data Infrastructure as the Early Warning System

The Diamond-Dybvig model is a game of expectations. The earlier a manager can identify emerging stress in its portfolio, the more options it has to manage the situation before expectations shift. This requires loan-level data infrastructure that goes beyond quarterly reporting: real-time covenant monitoring, automated source-system integrations, standardised data dictionaries, and reconciliation controls that support rapid credit risk escalation.

Managers who operate with manual waterfalls, spreadsheet-based fee calculations, and fragmented data systems face a structural disadvantage. They cannot move fast enough to identify deteriorating credits, adjust valuations, or communicate transparently with investors before the market does it for them. The information asymmetry that enables the bank run equilibrium is amplified by weak data infrastructure.

6.4 Investor Communication as the Confidence Anchor

The most underrated element of the operating model is investor communication. In the Diamond-Dybvig framework, the deposit insurance guarantee works by changing expectations. The guarantee does not need to be exercised; it works by existing. Similarly, a fund manager's ability to communicate proactively, transparently, and credibly during periods of stress can itself prevent the expectation shift that triggers the run.

This requires more than quarterly letters. It requires the operational capacity to produce granular, real-time portfolio analytics on demand, to explain valuation movements at the individual loan level, and to demonstrate through verifiable data that the portfolio's fundamentals support its stated NAV. Managers who can do this effectively are providing a form of private deposit insurance — using transparency and credibility as the guarantor.

7. Structural Implications and the Five Capabilities

7.1 The Structural Redesign Imperative

The current crisis will accelerate a fundamental redesign of private credit fund structures. The semi-liquid model that powered the asset class's growth from 2020–2025 has revealed its structural limitations. Going forward, the market will bifurcate between two models:

• Closed-end, committed capital structures where illiquidity is explicit, acknowledged, and priced from the outset. These structures eliminate gate risk entirely because there is no periodic redemption mechanism. Asset and liability duration are aligned by design, not simulated through structural engineering.

• Genuinely liquid structures (ETFs, listed vehicles) that invest in more liquid segments of the credit market, accept lower yields, and price continuously. These structures trade the illiquidity premium for genuine liquidity but eliminate the maturity mismatch.

The semi-liquid middle ground — which attempted to offer illiquidity premium with perceived liquidity — is the structural equivalent of a bank without deposit insurance. It works until it does not.

7.2 The Five Capabilities of an Excellent and Resilient Operating Model

For fund managers seeking to build or maintain credibility through this cycle, the operating model must deliver on five capabilities:

1. Dynamic Capital Allocation — Ability to rapidly deploy capital into high-conviction opportunities while maintaining dry powder for opportunistic buys during dislocations.

2. Advanced Risk Analytics — Sophisticated modelling of portfolio-level risks, including correlation shifts, sector concentration, and borrower-specific stress scenarios.

3. Operational Agility — Streamlined processes for deal execution, due diligence, and post-investment monitoring to capitalise on time-sensitive deals.

4. Investor Communication — Transparent, frequent, and insightful reporting that builds trust and provides clarity on portfolio performance and outlook.

5. Technology Integration — Leveraging AI and data analytics to enhance investment decision-making, operational efficiency, and risk management.

7.3 Who Must Act: The Addressee Question

The primary addressees of this analysis are not regulators. They are the individual fund managers, asset management companies, and their leadership teams. The competitive dynamics of the market will impose the discipline that regulation may or may not deliver, and they will do so faster and more decisively.

Investors who have experienced redemption gates, opaque valuations, and forced conversions of semi-liquid vehicles into drawdown structures will reallocate. They will move capital toward managers whose operating models demonstrably deliver on the five capabilities. Managers who cannot credibly deliver on these capabilities will face a structural decline in their ability to raise capital.

This is already observable. Blackstone's ability to meet all BCRED redemptions through operational preparedness and balance sheet commitment stands in direct contrast to Blue Owl's forced restructuring of OBDC II. The capital allocation consequences of this visible divergence will compound over subsequent fundraising cycles.

7.4 The Speed Imperative

If convergence toward these five capabilities is inevitable, the strategic question for individual managers is not whether to invest in their operating model, but how quickly they can do so. Speed matters for two reinforcing reasons.

First-Mover Advantage: Managers who achieve institutional-grade operating model capabilities ahead of their competitors will capture a disproportionate share of the capital reallocation that is already underway. The managers who can demonstrate, today, that their valuation processes are independently governed, their liquidity architecture is stress-tested, their data infrastructure supports real-time portfolio transparency, and their communication protocols are built for crisis conditions will be the first choice for reallocated capital. This advantage compounds: early movers attract capital, which provides operational scale, which funds further operating model investment, which attracts more capital.

The Cost of Delay: Managers who move too slowly face a compounding disadvantage that can become terminal. Each fundraising cycle in which a competitor demonstrates superior operational capabilities while the slower manager remains reliant on legacy processes, manual workflows, and reactive communication erodes the latter's competitive position. Institutional allocators increasingly treat operating model due diligence as a threshold requirement rather than a differentiator. Failing to meet that threshold does not result in a lower score; it results in exclusion from consideration.

8. Conclusions

The private credit redemption crisis of 2026 is a Diamond-Dybvig bank run re-enacted in the alternative asset management sector. The structural mechanics are identical: an intermediary performing maturity transformation against illiquid assets, creating fragility that depends on confidence to remain stable, and collapsing into a self-fulfilling run when expectations shift.

Four conclusions follow from this analysis:

1. The crisis is structural, not cyclical. The asset-liability mismatch embedded in semi-liquid private credit vehicles is a design flaw, not a market accident. It will recur in any structure that promises liquidity against inherently illiquid assets without a credible external backstop.

2. The operating model is the backstop. In the absence of deposit insurance or a lender of last resort, the fund manager's valuation integrity, liquidity architecture, data infrastructure, and investor communication capability are the only mechanisms available to sustain the "good equilibrium." Operating model quality is not operational efficiency. It is systemic stability.

3. Competitive convergence will enforce the standard. The market, not the regulator, will impose the five capabilities of an excellent and resilient operating model. Managers will either achieve this standard or lose clients to competitors who do.

4. Speed is the differentiator. The imperative is not only to build the operating model, but to build it fast. First movers will capture a disproportionate share of the capital reallocation now in progress. Those who move too slowly will not merely underperform. They will face a structural decline in their ability to compete, raise capital, and ultimately survive as independent platforms.

The liquidity illusion has been exposed. The question is no longer whether private credit funds can replicate the maturity transformation of banks. It is whether they can replicate the institutional infrastructure that makes banking stable. The answer lies in the operating model. And the time to build it is now.

There are more funds in the world than listed equities. Somewhere north of eighty thousand funds competing for assets in markets where reliable data covers perhaps a third of listed companies. For a mid-sized active manager in Zurich or Frankfurt, that is not a crowded market. It is a disappearing act in slow motion.

Everyone in the industry knows consolidation is coming. It has been coming for fifteen years. The consultants say so. The data say so. Yet in the tier-two segment, where the pressure is arguably most acute, transactions remain rare. The wave keeps being forecast. It never quite breaks.

The reason is not a shortage of motivated buyers. Banks with balance sheets built on interest income are watching that income become unreliable. Commission-based revenue from asset management looks stable by comparison, and it consumes a fraction of regulatory capital compared to an on-balance sheet loan book. The strategic logic is clear, the appetite is real, and in Switzerland and parts of continental Europe, the banking structure makes these buyers especially well-positioned.

The sellers are a different story.

Tier-two asset management in Europe was not built the way large corporates are built. Much of it was founded by the baby boom generation — portfolio managers who left private banks or insurance houses, built something over decades, and now face a succession problem: the next generation does not want to inherit the business. The ownership is personal. The client relationships are personal. The investment process, whatever its current competitive standing, is experienced as personal.

When a potential acquirer arrives, it encounters something that looks like a company but operates like a family decision. The founder wants to sell in principle. In practice, he wants the valuation he has been mentally applying for the last five years, board representation, continued involvement with key clients, and a vague assurance that nothing will really change. The buyer, working from transaction comparables and a discounted cash flow model, offers something different. The conversation stops before it starts.

This is where the standard advice fails. Advisers typically frame the problem as one of price discovery: the market needs more transparency, sellers need access to comparable transaction multiples, and once they see what similar businesses actually traded for, expectations will adjust. That is true as far as it goes. But it treats an emotional decision as an information problem.

A founder who built a firm over 30 years is not simply misinformed about its value. He has a genuinely different theory of what that value of his firm consists of. He believes his investment process is proprietary and valuable. He believes his client relationships are irreplaceable. He believes his team is exceptional. These beliefs may have been accurate a decade ago and before, when the firm was founded, when the strategy was less commoditised, when the client base was younger and stickier. Today, some of those beliefs are still true. Others are Kodak moments: a firm proud of its film-processing capabilities in a world that has moved on.

The gap between the inside view and the outside view is not dishonesty. It is the ordinary consequence of running a business without external reference points. Most tier-two managers have never had anyone systematically examine their products against the competitive landscape, their client retention against industry norms, their investment process against what an acquirer would actually value versus what would arrive as a liability. They have not needed to. Until now.

The usual fix, bringing in an M&A adviser late in the process to run a transaction, addresses none of this. By the time a formal process begins, the seller's expectations are set, the internal narrative is hardened, and any attempt to revise the valuation feels like an attack rather than a service. Deals die not at the negotiating table but in the months before anyone sits down.

What actually works starts earlier and is less transactional. It begins with a structured assessment of where the business genuinely stands: which products are competitive, which client relationships are truly portable, which operational capabilities would attract a premium and which would require remediation before any buyer would look twice. This is not flattery and it is not demolition. It is the outside-in view the typical owner has never had.

That assessment, done honestly, tends to open a different kind of conversation. Owners who understand the real drivers of their valuation, both positive and negative, can build a credible case for the price they want or accept that the timeline needs to extend. They stop defending an imaginary number and start working toward a real one. The emotional dimension does not disappear, because it should not. The relationships, the culture, the key talent who might leave if the transition is handled badly, these are all legitimate value factors, not noise to be discounted. In tier-two firms especially, where a handful of people often account for most of the client retention and investment performance, the human architecture of the firm is part of what is being priced. Ignore it and the integration fails. Price it honestly and it becomes a negotiating point rather than a dealbreaker.

The consequence of getting this wrong is not a bad deal. It is no deal. Assets do not sit waiting for a better offer. They migrate, quietly and continuously, toward Asset Managers with the distribution reach and operational efficiency to serve clients in a market where product choice is overwhelming. A tier-two Asset Manager who cannot transact does not stay tier-two indefinitely. He shrinks. His valuation falls with his AUM or even faster. The moment when a transaction might have made sense passes, and then he is below the threshold where the economics of an acquisition justify the effort of a transaction at all.

That is the hard truth the industry keeps not saying. Consolidation is not inevitable for every participant. For some, the alternative to a well-prepared transaction is not independence. It is a slower, less dignified exit, with no check at the end.

The buyers who win in this environment will not be the ones who make the highest offers. They will be the ones who arrive before the formal process begins, who help sellers understand what they actually have, and who structure transactions that accommodate the emotional reality of founders without letting sentiment override the economics. That requires patience and a different kind of advisory relationship than a standard deal mandate provides.

The wave is not coming. For a cohort of owner-operators now in their late sixties, running firms with compressed margins and succession plans that consist mainly of hope, it is already here.