The AltExchange Alliance has released an updated version of its data standard that includes crucial definitions for portfolio company metrics, a key step in convincing more GPs, LPs and service providers to back its initiative.
AltExchange, a non-profit consortium of private equity GPs, LPs and advisers, is pushing for a single standard for electronic data sharing between industry participants.
The group has already completed phase one of its mission of defining “core quarterly data” terms like capital accounts, schedule of investments, and cash flow activity. Over the last year the alliance – which now boasts more than 50 members including big hitters like KKR and the Teacher Retirement System of Texas – has expanded the standard to include portfolio company key performance indicators like industry and geography codes, which LPs are demanding more often from GPs for portfolio monitoring purposes.
In the coming months, the alliance is “likely to see significant activity focused on driving adoption of [the standard],” said AltExchange executive director Stuart Keeler. “The standard has been defined and there are technical solutions available now and others coming shortly that will help ensure adoption is as easy as possible for both GPs and investors alike.”
A challenge for the alliance will be convincing GPs that its adoption is a necessity. The private equity community is years behind other industries in establishing a common data reporting language, which some attribute to the small circle of relationships off which fund managers can build their success. Unlike brokers and banks, which can have tens of thousands of clients, GPs only have to report information to a select group of investors they may have a long-standing history with.
“Why is a GP going to spend the time and money updating their systems to use a standard that their LPs aren’t demanding?” said one fund administrator speaking to pfm about the Alliance’s work.
Others contend that GPs have expressed limited enthusiasm for a universal data standard because it hampers their ability to manipulate performance data. In a past comment letter, pfm argued that a regulator like the US Securities and Exchange Commission may be needed to create industry-wide adoption of a standard by force.
In its nascent stages, AltExchange encountered resistance from the private equity industry’s major software vendors that facilitate LP reporting. The vendors viewed it as a disguised eFront initiative, largely because AltExchange signed a five-year contract with eFront to certify documents running through the AltExchange validation platform.
The inclusion of rival software provider SunGard last year should “help alleviate those concerns,” said Keeler in a past interview with pfm. Moreover, the alliance is “self-funding and more active participants means less reliance on eFront to maintain momentum,” said Keeler.