Data management: a subtle but key competitive advantage

Good data management may not result in a quantitative competitive advantage between firms, but the advantage is nonetheless real, and key to driving better performance, said technology leaders at three major private equity firms.

Professionals from TPG, Global Infrastructure Partners and The Carlyle Group discussed the challenges of archiving, accessing, and using their data during a panel entitled Private Market Data Management Nirvana: Does It Exist? hosted by data management platform, Mercatus. The event, held on Wednesday, was moderated by former KKR co-chief techonlogy officer Assunta Gaglione-Austin.

GIP’s chief technical officer Rob Siegel sees three distinct concerns regarding getting data management right. The first is data completeness: is the firm capturing portfolio, pipeline and administration information cleanly and consistently? The next consideration is the reliability of the data: is the data believable? Last, and most challenging, is accessibility: how much time does it take the data to get to those who need it?

“Fundamentally, you have to start from the beginning. How do you get each of those silos to work and then pull them together,” Siegel said.

TPG’s CIO Scott Toornburg agreed. When data is managed well, “the cost per transaction goes down, which means that cost savings can be passed on to the business” and ultimately back to LPs, said Toornburg.

“That’s what I think, competitively, we’re up against. We’re not really competing against each other, per se, but we are competing inside our four walls,” Toornburg added.

Affiliate title PEI reported on Wednesday that more than half of PE firms believe that over the next 18 to 24 months, artificial intelligence will be an important value lever for their portfolio companies, improving automation, forecasting and decision-making that directly impact margin enhancement and cash conversion.

Efficiently managed data can also improve the quality of interactions with limited partners. Carlyle vice-president Liz Bock described her firm’s drive to democratize data within the firm, allowing relationship managers to access key real-time performance metrics across funds and investments in order to foster more timely, meaningful conversations with LPs.

“It’s really about connecting the dots between people, deals and information,” said Bock.

The case for data management became clear during the pandemic, which left firms with a sudden, immediate need for clarity around cashflows, liquidity positions, and even portfolio company viability. “Without the use of technology some firms will struggle to streamline that and capture both structured and unstructured datasets. For many, the key first step is transitioning from a spreadsheet-based system to a specially designed platform,” said IHS Markit’s Dalen Chow in April.