Today’s newsletter topic takes a look at the part that automation can play when it comes to investor reporting.
The first day of Private Debt Investor’s CFOs & COOs Forum has come and gone, and a number of panelists focused on the increasing emphasis investors are putting on transparency, reporting and due diligence.
“The demands for reporting and due diligence keep increasing. I told my husband, ‘Please don’t get a speeding ticket, because somebody’s going to find out that you have speeding tickets and it’s going to be part of the due diligence process,'” one panelist joked.
One CFO explained how the need to automate the firm’s investor reporting started as early as seven years ago: “We were at a point where our excel spreadsheet was about to break. When it comes to fundraising, [investors] always ask for a plethora of data. One day, I just want to know: do they actually use the information?”
The same CFO acknowledged that for investors, the reporting isn’t just about the data; they want to know how firms are handling the capital risks that come with fundraising and managing a portfolio.
Relying on the right technology makes it possible for firms to have real-time conversations with investors, a second CFO said. If an LP has any questions it’s important to be able to say: “Here’s our portfolio review we can walk through this right now,” they said.
Simcha David, a tax partner at EisnerAmper, believes LPs are also becoming more sophisticated in the types of diligence they request of funds.
“I think it’s because LPs feel they have this power as the allocators even though there’s been an increase in the allocation to private equity,” David wrote in a guest article for Private Funds CFO.
Today’s letter was prepared by Brian Bonilla.