One of the challenges private equity firms face is a growing demand for specialized reporting requests and customized templates from investors. The demand for specific reports and personalized data is a significant change from the single-page PDF reports of the past. Limited partners expect higher quality and intelligent information in these reports, extending beyond operational information and into portfolio-level data. LPs also expect that reports are delivered with unprecedented speed. Turnaround time between an investor’s request for specific information, locating and compiling accurate data, and distilling it into a digestible and deliverable report can be constrained into one or two days.
The crux of the challenge is many PE firms have dated back and middle office infrastructure. This includes people, processes, and systems. Some PE firms lack key fund administration functions, such as an efficient and centralized data repository, or they continue to rely heavily on manual operations to generate even the most basic report. It is important to not undermine the challenge these PE firms face. Firms might serve hundreds of investors, with each investor having multiple requests for different and detailed information. Meeting these customized reporting requests create a huge financial burden to firms, and stretch resources in an increasingly more competitive environment.
With these developments, PE firms must strategically allocate resources. Outsourcing fund administration functions to third-party solutions and providing investors with a digital platform, including visualization of transaction values and currency exposures, are steps toward meeting heightened levels of transparency, compliance, and security.
Data transparency is a trend that isn’t going away. New investors are looking closely at firms with the infrastructure to support compliance requirements and the ability to timely deliver data. The increased scrutiny by LPs and the demand of specialized reports and customized templates is becoming the norm. In order to remain competitive, assembling the right personnel, implementing efficient administrative technology-driven solutions, and establishing a policy that factors investor demands are changes that PE firms have to make.
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