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Confronting challenges with the availability of data in private equity fund reporting

By Published On: December 13, 20233.5 min read

Jill Calton  | 

December 13, 2023  | 

Reading Time: 4 minutes

Confronting challenges with the availability of data in private equity fund reporting

More than most asset managers, private equity firms have long recognized the need for playing offense as part of their strategy around fund data. In this sense, “offense” includes using fund data in customized investor reporting as well as sales and marketing efforts.

Unique institutional investor reporting needs

There are likely few private equity industry veterans who haven’t experienced a mad scramble in responding to an urgent, complex request for a client-specific report. Because of those experiences—not to mention the complexity of private equity investments themselves—most managers have emphasized flexibility, first and foremost, in their approach to fund data.

But flexibility isn’t enough anymore, given three interrelated characteristics of institutional investors. Compared to other investors, they are more likely to:

  1. Have complex, customized investment programs
  2. Expect amplified fund reporting, both periodic and one-offs
  3. Request real-time electronic access to investment information.

Layer on private equity fund reporting challenges on the regulatory front (part of the “defensive” side of a fund data strategy), and the result is increasing stress on existing, often home-grown approaches. For example, while spreadsheet-based operations provide flexibility, they are notoriously error-prone and can require managers to move mountains to respond to regulatory exam inquiries—or simply to adapt to changing regulatory requirements.

How can managers streamline their investor reporting data?

Private equity managers may have tolerated this operational stress longer than most other types of asset managers because they know the value of their data and flexible use of it. But many can no longer tolerate risks of errors, operational delays and—to put it bluntly—looking a bit mom-and-pop to their increasingly sophisticated investors.

Many private equity managers recognize benefits in working with a third-party administrator—including structured data and consistent processes—but are worried they will no longer be able to readily access and work with investor data for advanced hedge fund or private equity fund reporting and analytics for sales and marketing efforts.

This data accessibility concern may be valid in some cases, not because a third party seeks to hold and control the data but because ongoing data sharing is technically difficult. For example, if the third party’s own systems aren’t fully integrated with front-end investor and back-end reporting systems. If the third party has to assemble data from multiple sources, then “reporting” (as opposed to free-flowing data access) may be all the third party can accommodate.

To the extent some private equity managers may still be reluctant to retire what we consider to be high-risk operational practices, we suspect it’s because they recognize the value of their data. Our take is they are correct in recognizing data access is vital and may be pleasantly surprised when they realize they can get to “yes” on all three of the following questions if they find the right partner to deliver:

  • Are you confident you can respond quickly to regulators, without having to move mountains?
  • Are you able to access and truly work with underlying data (not merely viewing and interacting with reports)?
  • Are you confident the data you share with clients is accurate and delivered on time?

UMB recognized early—more than 12years ago—that managers would need far more than just reporting. That recognition was a leading reason for our decision to build a fully proprietary system, which we maintain with internal software-engineering experts. We are readily able to respond to managers’ data requests and, just as importantly, managers can perform searches, run complex queries and export data for a strategic approach to private equity fund reporting.

Learn more about UMB Fund Services and how we can support your firm’s registered and alternative investment fund servicing needs, or contact us to be connected with a fund services team member.

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By |2023-12-13T15:52:20-06:00December 13, 2023|Categories: Institutional|Tags: , , |

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About the Author:

Jill Calton is executive vice president, executive director of alternative investment operations for UMB Fund Services, and provides leadership and oversight to all of the company’s alternative investment client servicing teams.
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