Venture capital and mid-market private equity firms are focusing on the growing regulatory challenges from cybersecurity and AI, giving indicators about the future direction of the market.
According to research for Ocorian, around three out of four (75%) believe cybersecurity compliance issues around data protection will pose the greatest technology-related challenge to their firm over the next two years, ahead of 60% who point to the challenges of adapting to AI governance and its use in compliance.
The study with senior U.S. and Canadian executives at mid-market private equity and venture capital firms responsible for $335.25 billion assets under management examined how they rank the emerging technology-related and people-related pressures.
More than six out of 10 (61%) believe recruiting and retaining qualified compliance professionals and regulatory complexity in offshore jurisdictions will be the biggest people-related challenges for their firms over the next two years, the research by Ocorian, which provides fund solutions in the U.S. and globally, found.
Integrating new technology with legacy systems was rated the biggest challenge by 58%, while 53% pointed to the cost of compliance technology such as platforms and RegTech tools and 52% highlighted the pressure of keeping up with regulatory requirements for digital infrastructure.
Around half (45%) ranked the cost of internal compliance resources as a major people-related compliance challenge for their firm with 42% saying that SEC scrutiny and enforcement actions plus the need for independent scrutiny would pose the greatest challenge to their firm. More than a quarter (26%) say reliance on external counsel would pose the biggest challenge to their firm.
The study found that industry reputation is the most important factor when choosing external vendors for compliance or technology support chosen by 49%. However, as the data below shows, a wide range of factors are important. Cost was rated as most important by 28%.
| Which factors are most important when choosing an external vendor for compliance or technology support? | Percentage choosing |
| Industry reputation | 49% |
| Integration with internal systems | 44% |
| Ability to customize solutions | 43% |
| Track record with regulators | 41% |
| Technical capabilities | 30% |
| Speed and responsiveness | 29% |
| Cost | 28% |
| Recommendations from peers | 25% |
| Existing relationships | 9% |
Howard Nurtman, Head of U.S. Regulatory and Compliance, Fund Solutions, at Ocorian, said: “The regulatory landscape for VC and private equity is shifting faster than ever. Cybersecurity and AI governance are no longer emerging issues; they’re here, they’re complex, and they demand specialist attention. This aligns completely with what our Global Asset Monitor has been tracking globally: technology-driven compliance risk has risen to the top tier of manager concerns for three consecutive years.
“Despite investment in technology, the pressure on people hasn’t gone away. Compliance teams are stretched, recruitment is difficult, and regulatory expectations, particularly cross-border, continue to intensify. Firms are realizing that solving this isn’t just about tools, it’s about experience.“It’s not surprising that reputation and regulatory track record now outrank cost when selecting external partners. In a more scrutinized environment, managers are prioritizing providers who can demonstrate credibility, integration capability and genuine regulatory fluency. Outsourcing isn’t a cost solution anymore, amongst many other things, it’s a strategy for building resilience.”
