Future focus: Investor reporting

Investors are increasingly clamoring for homogenized, customized and near instantaneous data.

“Timely and accurate reporting is still the most crucial factor when dealing with a client’s investors,” says James Jefski, global head of client solutions for private markets at State Street. “As the investor base and products change, we have seen asks for acceleration and overall transparency, as well as asks for customized investor reporting. In addition to standard investor reporting, there have been increased demands for performance. Lastly, as multi-jurisdiction and new registered funds and products continue to evolve, being able to support the investor experience across all of them is becoming more important.”

“What LPs need is accurate and relevant information, delivered in a timely manner,” adds David Sarfas, co-head of fund solutions at CSC. “The more relevant the data, delivered quickly in a customized format, the better. Our research shows that nearly half of the GPs we surveyed faced challenges in reducing the response time to their investors. This was primarily driven by constraints around systems and processes.”

As a result, GPs are putting pressure on their service providers to help close this gap. “GPs expect fully tailorable reporting solutions.” Sarfas says. “We tend to see more detailed outputs delivered more quickly, while maintaining the expected standards of security and accuracy.”

“The sheer amount of data that LPs require has increased substantially,” says Serge Weyland, director general at the Association of the Luxembourg Fund Industry. “The number of metrics they are monitoring at a portfolio company level has increased significantly as well. Investors want a clear view on sector exposure, on gearing and on cashflows, for example. Among institutional investors, this is a clear trend.”

Agnes Mazurek, global head of private markets innovation at Apex Group, agrees that customization is a key requirement and that investors are increasingly demanding more granular information at the asset level. She says this is partly a reflection of escalating demand for co-investment.

“Allocators are typically seeking the flexibility to maximize allocations to particular investments, which can be done through co-investment rights,” Mazurek explains. “A basic requirement for investor level reporting on a per asset basis is a reflection of this trend, along with increased scrutiny on investment portfolio reporting solutions.”

Regulatory oversight

Meanwhile, the regulatory oversight of investor reporting is intensifying too. Under the US Securities and Exchange Commission’s new private fund rules, all registered advisers will have to provide investors with a detailed quarterly fee, expense and performance statement, by fund and by portfolio company, including performance figures, net of subscription line financing. The new regulation is likely to increase the prevalence of outsourcing in the US, where the outsourcing penetration rate remains significantly lower than in Europe.

“The sheer amount of data that LPs require has increased substantially”

Serge Weyland
Association of the Luxembourg Fund Industry

Of course, one of the key drivers of the SEC’s enhanced regulatory scrutiny of private markets is the fact that these asset classes are increasingly being accessed by private individuals. This new investor base is having other impacts on reporting requirements as well.

While institutional investor demands for information are increasingly granular, the nascent private wealth investor base has a different set of demands. “User experience is an absolute priority when it comes to investor reporting, but the desired user experience will differ depending on the investor involved,” says Weyland. “Institutional investors require a great deal of disciplined data management and robust systems, while the wealth management segment is looking for easy to understand data that is readily comparable across funds. For those investors, managers need to be able to build an easily digestible investment story around their deals.”