On-demand data

In an asset class where many LPs have multiple – indeed sometimes hundreds of fund manager relationships – the task of aggregating and analysing performance data can be daunting. After all, multiple managers means multiple report formats, delivered at different times and all with different data points.

 In an ideal world, LPs would access one database in which all their general partners input the same comprehensive and timely data, allowing them to drill down into the debt covenants and gross and equity fair value of assets one minute, before – at the click of a button – taking a 30,000-foot perspective of the LP’s exposure to US or Asia hospitality across all its managers.

Such on-demand data is the stuff of LP dreams, many would argue. Not necessarily.

The Blackstone Group has kick-started the process by developing an interactive LP portal that will not only allow the firm’s investors to view their exposure to Blackstone funds and deals across asset classes, geographies and sectors, but also allow limited partners to import data from their other GPs.

Called BXAccess, the system is certainly not revolutionary in terms of the technology it utilises being accessed through web-based dashboards, the kind of which are found in most major financial institutions.

What can be described as revolutionary though is the ability of LPs to be as interactive as possible in how they view fund investment data. Rather than relying on static PDFs, for example, LPs will be able to view, aggregate and analyse the underlying data of their Blackstone investment according to more than 200 data points, across the real estate, private equity and credit asset classes and numerous sectors globally.

Edwin Conway, senior managing director for Blackstone’s investor relations group, says that in a volatile post-Bernard Madoff world filled with great uncertainty, it’s no longer good enough for LPs to invest with a “great manager just because they provide great returns. LPs and their board members want and need much more granularity on the investments made on their behalf.”

Groundwork

Blackstone has spent the past year developing BXAccess, however the system’s foundations were laid roughly five years ago when president and chief operating officer Tony James pushed the firm to create a systemic way of gathering and comparing data on portfolio companies, investments and assets. “We wanted to have a better way of capturing information on our deals,” says Harry Moseley, senior managing director and Blackstone’s chief information officer.

What evolved was the Portfolio Company Reporting System (PCRS), which allowed Blackstone to easily access portfolio company key financial and operating metrics all in one database and feed that information into Blackstone’s valuation and quarterly review process.

Moseley explains the system worked so well several GPs approached the New York-based firm interested in licensing the product. As a result, Blackstone created the technology spin-out, iLevel Solutions, to do just that. This July, iLevel raised $6 million of funding from Egis Capital Partners, Swift River Investments and Epiphany Ventures, allowing Blackstone to become a minority investor.

BXAccess, which will be offered free to all Blackstone investors once fully rolled out and will be  hosted by iLevel, is a natural progression of PCRS, Moseley says.

When LPs receive their data from GPs, most spend a long time inputting (sometimes manually) that information into their own systems to run “batches of reports to discover the exposure to certain sectors, geographies, currencies”. The same is true for GPs responding to multiple LP reporting requests, he adds. “You can get five calls from five different LPs and they need five different views of the same data in order to do their analysis.

“This system is not just about reporting but making it easier to analyse the data,” Moseley continues. “With this system you don’t have to spend eight hours a day grinding away getting the data into a spreadsheet, reconciling it and formatting it and then only have two hours for analysis. I know I’d rather spend eight hours analysing the data.”

Digging deeper

At first glance, BXAccess looks very similar to Blackstone’s company website offering LPs five environments in which to start delving into their investment data, including a home page; funds; my investments; documents and contacts.

LPs will only be able to access information related to the fund they are invested in. So an LP with a $100 million commitment to Blackstone Real Estate Partners VI, for example, will only be able to get data relating to that fund, its deals, geographies and sectors. An LP invested in all of Blackstone’s real estate vehicles – as well as some private equity and fund of hedge funds – will be able to see their exposure across all relevant asset classes, funds, geographies as well as sectors.

But with more than 200 data points to access, LPs have plenty to go at. Under the “funds” page, for instance, an LP selects the appropriate asset class and gets not only an overview of the vehicles it is committed to, together with pie charts summarising property types and geographies for those funds, but they can also look at a variety of valuation and performance metrics, including total realised and unrealised values, gross and net IRRs and multiples. Such hierarchies though are not fixed, Moseley notes. LPs can add and remove data points according to the type of analysis they need to do, as well as sort the data in ascending or descending order.

Once in any environment, LPs have the ability to dig even deeper into the data, and retreat, at their leisure.

Take the LP with the $100 million commitment to BREP VI as an example. Looking at the funds page of BXAccess, they will be able to see high level valuation and performance data of that vehicle and the deals it has made according to property type and geography. Scroll down the page and the LP will be able to see the deals it has invested in and key financial information relating to that transaction. It only takes one click of the mouse to access detailed transaction information on an investment, with the LP taken to a “tear sheet” detailing the investment thesis, property investment description, recent performance, valuations, leverage, covenants and maturities among other things.

The same functionality exists in the “my investments” page, which provides data on an LP’s capital commitment or multiple commitments.

LPs are able to see high level data relating to the commitments and analyse those commitments’ exposure to property investments and geographies. Scrolling down the page they can then see the key financial information about their capital including called and expired capital, undistributed proceeds, unrealised appreciation and advance and pending draw downs among other things. One click further and an LP can see the deals it has invested in, together with a tear sheet of the transaction and the deal team – and coverage team, with an individual’s email, biography and phone number – involved in the deal.

Like many other portals, BXAccess will also have a document site and archive, however unlike many others it will also have a full text search function.

Testing times

Blackstone has initially focused its attention on developing the portal for its private equity investments and funds, with real estate and credit strategies set to follow soon. Last month, the firm rolled out a pilot of the system to a select group of LPs invested across Blackstone’s real estate, private equity and credit funds with plans for a “gradual” roll out to other investors. “We want to make sure we get this right,” Moseley says, with Conway stressing Blackstone was “committed” to a full, free roll-out of all the firm’s investors over time.

Moseley says the firm eventually plans to update the system with the latest quarterly performance data for all asset classes within days of the firm’s earnings reports. Initially, BXAccess will be updated at least quarterly, but that could increase to weekly, or more frequently for different data sets, as the system develops. Alerts will also be sent to LPs when relevant notices are posted to the site.
Of course, the system isn’t just of use to Blackstone’s 1,150 investors, but will prove invaluable for the firm’s employees as they deal with LP enquiries in particular. “BXAccess allows investors, to some degree, to answer questions about the portfolio themselves,” says Moseley.

Both he and Conway accept though that in providing unparalleled interactive access to investment data, LPs will undoubtedly pose new questions to Blackstone staff. Conway stresses: “We know it’s great to provide a report, but it’s better to have people at the end of the phone to discuss, dissect and help make that information digestible.” Blackstone has therefore significantly ramped up its IR and business development function over the last two years to explain to LPs “exactly how we’ve deployed the capital they’ve invested with us”.

Managing multiples

As LPs increasingly call for greater standardisation in fund reporting, it is BXAccess’ multi-manager capability that could prove invaluable for investors. As well as being able to export all the investment performance data for Blackstone funds and deals into their own systems, LPs can also export a BXAccess template for other GPs to complete.

Once filled in, that template, which will include the same environments and hierarchies as BXAccess, will allow an LP to view their exposure according to property types and geographies across all GPs who use the system. LPs will also be able to grant their consultants access to the system.

It was in trying to develop a multi-manager function that Blackstone opted to have their system hosted by iLevel Solutions. “There would have been too many conflict of interest issues [in Blackstone hosting the system] otherwise,” Moseley says. And undoubted push-back from rivals reluctant to share information with a Blackstone spin-off entity. Of course, Blackstone and its LPs may still find other GPs reluctant to get involved in BXAccess once it gets off the ground. For now though Blackstone LPs can simply enjoy having their data on-demand.