Fund managers need to put greater emphasis on how they manage themselves, and chief financial officers are well-placed to drive this strategic agenda.
This was the message from delegates at the 15th annual Private Equity International CFOs and COOs Forum in New York on Wednesday.
As firms increase their assets under management, their own finance team tends to be the last thing to grow in size, one delegate said.
“If you don’t have your eye on that ball, mistakes are going to be made,” the delegate added. “The reporting requirements for LPs… have gotten a lot more difficult, everyone has their own form or they want it this way or that way, so there’s a lot more to do.”
The majority of firm leaders tend to be “investors at heart”, another delegate said; the management team can therefore benefit significantly from the addition of someone with an operational approach.
There has been a shift toward more understanding of the role the CFO can play on the management company side of the general partner itself, in addition to the value they bring on the fund management side.
“As the industry has grown in the last 15 or 20 years, the firms have become real operating businesses…that should be run just like any other business that they want to invest in,” the delegate said, adding that this includes everything from managing costs to weighing up whether it’s possible to add staff members without changing the compensation structure, to managing risk.
“What would you expect from the CFO at your portfolio companies?” another asked. “We should be able to deliver at least that.”