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Private equity data: a differentiator for progressive funds

23 June 2022

Matthew Rush

Commercial Director, Intertrust Group, Cayman Islands

Matthew Rush

Commercial Director, Intertrust Group, Cayman Islands

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Ever-growing demands for private equity data create a potential advantage for forward-thinking fund managers

There is clearly an appetite for more reporting and transparency in private equity, as our 2022 Future Private Capital CFO report shows.

The sector is following a well-worn path towards democratisation of data. Just as data-driven tech companies, such as Google and Amazon, have made data available to anyone who can access the internet, today’s private equity investors also demand more access to financial information.

Private funds have not previously faced demands from limited partners (LPs) for constant live data streams, but the trend is accelerating. This presents progressive funds with an opportunity to use data to their competitive advantage.

Growing expectations for private equity data

Why do private equity LPs want more data? One factor is that public market investors are moving into the alternative space. As a result, they bring similarly heightened expectations of information flow and reporting.

In the world of mutual funds, investors see daily Net Asset Value assessments via a number of data intensive solutions – such as a Bloomberg terminal providing real-time updating. This information is easy to digest and readily available.

Another factor is the generational change. A younger generation has grown up expecting instant data from social media accounts or their banking apps. So why not from their private equity funds?

LPs, especially those from the public markets, know private equity analytics isn’t straightforward, but the expectation is still there. If the data exists, why shouldn’t it be at their fingertips?

A proactive approach to private equity analytics

However, not all investors are the same.

More passive LPs take a traditional approach to receiving private equity data.  They are comfortable that their investments are locked up for the long term, so they are happy with less frequent reporting, leaving day-to-day fund management to the managers.

For these investors, annual or bi-annual reports are more than enough.

But we should recognise that a growing number of investors are becoming more proactive. These LPs – both high net worth individuals and institutional investors –  expect far more than basic performance reporting.

Increasingly, they want access to everything: management fees, operational costs and how an underlying portfolio is performing. If there’s a charge they don’t understand, they’re quick to question it.

An appetite for private equity data transparency

This isn’t micro-management purely for the sake of it. The private equity field has become highly competitive and investors are looking for data-driven results that may give them an edge in selecting better performing deals.

New LPs will want better-quality data to help them understand how they achieved their returns.

Furthermore, there are increasing environmental, social and governance (ESG) metrics that need to be reported. Many LPs, especially institutional investors, are under growing pressure to demonstrate that capital is invested responsibly.

In a recent proposal, the US Securities and Exchange Commission (SEC) said it would like to see more transparency in the private equity industry. Some increased regulations will be inevitable.

Changing times for private equity data

Today’s tech-savvy LPs want private equity data on fees, management charges and underlying performance. Most won’t demand daily reporting – but will expect instant access to data whenever they need it, ideally through easy-to-use client portals.

Regardless of the data demands, investors put their capital into private equity to maximise returns. While they will always appreciate more information, fund managers must find the optimal balance between giving investors what they want and keeping costs to a minimum.

The fund manager that can leverage vast amounts of data for higher-grossing decision making will succeed.

Are funds prepared for private equity analytics?

Are funds ready for this fundamental shift? For many, there is still work to be done.

Well-established fund managers may have some wriggle room here, because relationships with LPs are built on time and trust.

Nevertheless, to avoid losing ground, they need to start thinking about how more in-depth information can be collated, verified and delivered.

As for up-and-coming fund managers, a willingness to offer more and better data will create an enhanced sense of trust that should help them attract investors.

Returns will always be the main draw of any LP, but having systems in place to report the underlying metrics is increasingly important.

How Intertrust Group can help with private equity analytics

  • Intertrust Group helps fund managers collect and curate the information their investors want, using proprietary innovative technologies combined with global knowledge and experience.
  • Our expert teams eliminate costly errors in the handling of fund administration and corporate actions, investor relations, and portfolio management.
  • As a strategic partner, we offer a full-spectrum service tailored to meet all back-office needs throughout the lifecycle of a private capital fund.
  • Intertrust Group is a publicly listed company with 70 years’ experience providing world-class trust and corporate services to clients around the world.

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