Embrace your inner nerd

Today’s private investment fund managers have at their disposal a supermarket of software packages and investor reporting tools designed specifically for their asset class. 

But unfortunately not all GPs have an easy time (or put the effort into) tracking these ever-advancing technologies, leaving some features unused and some firms behind the times. Younger industry professionals have told PE Manager that some senior partners who are less comfortable with technology are often intimidated by all the bells and whistles included in dashboard systems, virtual meeting rooms and cloud solutions for example. 

At the same time, back office professionals are receiving an explosion of information requests from LPs. According to a survey seen by PEM that iLevel Solutions will soon publish, nearly half of private equity fund managers feel they are falling short of or struggling to keep up with LP data demands. Meanwhile a majority of respondents said they have no intention of increasing their back office staff in the coming 18 months, which means employees will need to have the right tools and technology in place to remain efficient. 

There’s an obvious challenge here then for many GPs. Unless they embrace the software tools available, firms risk being unable to cope with LPs’ increasing information requests. This can do more than just leave LPs annoyed. At a recent industry conference The Blackstone Group’s chief financial officer, Laurence Tosi, citing a KBW investor survey, said transparency and better reporting was now one of three key factors (alongside, unsurprisingly, performance and fees) in investors’ GP selection process. 

Blackstone is in fact considered a pioneer in the level of portfolio company information it provides to LPs. And it does so with speed. Through iLevel, which Blackstone pioneered and later spun out in 2009, the firm harvests data points from its portfolio companies into a central database, including thousands of collected and calculated key financial metrics and “sentiment data” from senior executives. This data then flows automatically from iLevel’s cloud-based service into Blackstone's valuation process, allowing the firm to deliver fund reports a short three weeks after quarterly close. LPs are given access to all data points relevant to the funds they’ve invested with through a Blackstone web portal which allows LPs to slice and dice the numbers as they see fit, including filters on industry, region, time, fund or geography.

An obvious benefit in all this is that LPs are provided a way to do their own homework on fund information. With a few clicks of a button, LPs are able to create their own ad-hoc reports, in effect reducing the amount of information requests sent GPs’ way. 

Consequently GPs that embrace the software solutions now available will be ahead of the curve with investors who now greatly value transparency and reporting efficiency.  

To help private equity firms better understand how technology can reduce workload and stress, be sure to check out the January edition of PE Manager, which will include a look into the pros and cons of cloud computing as well as how technology can enhance your firm’s disaster recovery and business continuity planning.