In the rapidly-changing world of post-pandemic private equity, picking the right third-party administrator can help funds differentiate themselves in a competitive marketplace.
We’ve previously discussed the benefits of outsourcing fund administration regardless of a fund’s size, as well as how to avoid some of the pitfalls often encountered in selecting an administrator. While it’s true a fund administrator can help with back-office functions, it’s a mistake to think that’s all they can provide. The right third-party administrator can also help you attract investors by allowing your fund to offer services others lack.
For today’s PE firms, basic fund accounting – and the copious Excel sheets and general ledgers that come with it – will no longer cut it. With the industry booming, regulations shifting, and technology adoption accelerating, investors have higher standards than ever for impact measurement, transparency, and real-time access to financial data. In order to stand out, you need a strategic partner to give you the tools to attract the next wave of savvy investors by offering the key things they’ll be looking for.
More Than Ever, Investors Care About Impact and ESG
Impact investing has been on the rise, with investors eager to put their money to productive use. If we expect this trend to continue, how do you position your fund to be more attractive than others? The way to do so is to provide data that proves your projects are really making an impact.
A recent survey found 32% of asset owners now require thematic metrics that demonstrate how their investments make a measurable social and environmental impact, and nearly 40% plan to demand this information moving forward. New regulations – be it the EU’s Sustainable Finance Disclosure Regulation (SFDR) or the potential for new ESG reporting and disclosure rules from the SEC – will only ratchet up these pressures.
As interest in ESG and impact investing continues to skyrocket, many PE firms are struggling with comprehensive reporting and measurement: a 2020 survey, for instance, found that while two-thirds of PE firms take ESG into account, only 29% make a full ESG policy publicly available.
To show they’re making a real impact and avoid claims of “impact washing,” PE funds should look for fund administrators with deep expertise in highly-regulated fund types, complex regulatory requirements, and world-class impact measurement capabilities. The right partner will also have technology that empowers PE firms to strike the right balance between deploying more standardized reporting programs that relieve administrative burdens and allow for scale while implementing more complicated methods when particular situations call for it.
JTC has worked with Howard W. Buffet and his advisory firm, Global Impact LLC, to expand our impact reporting capabilities, offering data-driven, objective measurement of impact metrics for funds and projects. This includes the use of Buffet’s Impact Rate of Return® methodology, which allows for measurement and evaluation of social impact and gives fund managers the ability to compare investments with different impact goals.
Better Understanding Data can Position Funds to Enter Growing Markets More Quickly
Traditional fund administration is centered around a general ledger, with many bolted-on applications for necessary tasks (CRM, AML, reporting, etc.). While this might seem intuitive, the process can be slow and prone to error. At each step, this application-centric approach requires point-to-point data transformations, which largely rely on manual data entry and manipulation. For example, to run an AML process or application, administrators need to adjust the data to fit that application manually, and the time required for each task quickly adds up.
At JTC, we do things differently, building around the data itself. By standardizing formats, data can seamlessly be provisioned out to any system or process and allow these workflows to run in parallel. This way, reporting can be done in hours, not days or weeks. These automated processes can also make reporting more accurate: manual data manipulations are prone to error, especially if administrators outsource data handling (as many do). With faster and more accurate reports, decision-making will be quicker and better, improving performance even in complex sectors like Fund of Funds.
On the compliance front, efficient and accurate data handling means a fund can adapt more quickly to changing regulations and requirements. The fund already has all the data it needs; it’s just a matter of parsing it and reporting it in a way that satisfies the new requirements. With investments in alternative asset classes on the rise, funds using automated processes can enter these new markets earlier than competing firms who may find they need to develop entirely new processes to satisfy the requirements of the new asset class.
JTC’s data-centric architecture can make things faster and more accurate, and this improved efficiency will be noticeable in a crowded marketplace. With so much competition among funds for capital, investors will be looking for key technological advances that can be provided by a fund administrator like JTC Americas.
The Pandemic has Changed Investors’ Expectations for Transparency, and We’re not Going Back
One consequence of the COVID-19 pandemic was that it forced PE firms to adopt virtual communications and processes. Things won’t go back to the way they were before, and that means smoother digital workflow processes and no more quarterly PDFs. Investors expect to be able to view reports as soon as they’re available, and greater transparency regarding all fund actions.
With transparency so important to today’s investors, JTC offers a leg up with its proprietary eSTAC platform that offers features like a 24/7 client portal, document archiving, and an audit trail of system activity. If you partner with JTC, your investors will have access to the information they want, just as they’ve come to expect in an increasingly remote and digital world.
The right fund administrator can help you be more transparent, provide the type of workflow and data that post-pandemic life demands, and be ahead of the pack on forward-facing sectors like impact investing. That’s why JTC is built on technology, transparency, and collaboration to ensure we’re working with you not just to carry out administrative tasks, but as a strategic partner that will help you raise more capital and stay at the forefront of the industry.
Together We Grow
Learn more about JTC Americas’ fund administration by downloading our Private Equity Fund Administration Collateral today!