Study: GPs lack system integration

Half of GPs surveyed by research group TABB and technology provider SunGard admitted that their front and back office systems are not adequately integrated.

The survey, of 119 senior private equity executives from the US, Europe and Asia, found that 57 percent of respondents also feel that the time it takes their systems to offer a full picture of their portfolios is preventing them from managing the firm effectively. A lack of frequent and timely reporting was also found to be a significant challenge in firm management.

Most firms are likely to have fund administration and accounting data in one system and portfolio company operating data is in another system, said Jason Haft, principal at SunGard. He puts this down to systems being purchased for individual requirements.

“The needs of why people implemented the systems were to solve very specific needs,” says Haft, “There was never a great purpose to have those systems linked to one another.”

However, increasing regulatory burdens is leading GPs to devote more time and attention to system integration, the research found.

“These new regulatory challenges that are clients are facing require all this information to be gathered together and it is information that is typically collected by different groups in the organization,” said Haft.

In the US, large private fund managers must now file Form PF for systemic risk monitoring purposes and Form ADV as a registered investment advisor. In Europe, the Alternative Investment Fund Managers Directive is introducing new reporting requirements for EU-based fund managers.

“Bringing that information together if you don’t have systems integrated requires an exercise in human heroics to make that happen,” said Haft.

He noted this can be seen especially clearly with the requirements of the Foreign Account Tax Compliance Act (FATCA). FATCA requires fund managers to gather more information on their LPs for tax reporting purposes, which Haft says can be challenging when back office systems are not well integrated with front office functions that typically have greater interaction with LPs. 

The February edition of PE Manager will feature a special report on systems and technology that will include an investigation into the industry's quest for a single data reporting standard.