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Private equity managers are right to be wary of fund data ‘held hostage’ by third-party administrators

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 reporting as well as sales and marketing efforts.

Unique reporting needs of institutional investors

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 reporting, both periodic and one-offs
  3. Request real-time electronic access to investment information.

Industry survey data reflects these realities. For example, a Deutsche Bank study‡ released earlier this year showed that nearly a third of institutional investors have customized investment programs among their allocations to alternatives. And an EY study issued late last year‡ put “improved investor reporting” well ahead of either front- or back-office capabilities with respect to what alternatives investors want their managers to focus on, with 40% of investors putting reporting among their top three priorities.

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.

Confronting challenges with private equity fund reporting

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.

But what private equity managers don’t want is for their data to be “held hostage” by a third-party. Many 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-hostage 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 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 10 years 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.

UMB Fund Services is a national leader with decades of experience in registered and alternative investment fund servicing. Visit our website to learn how UMB Fund Services can support your firm, or contact us to be connected with a fund services team member.


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When you click links marked with the “‡” symbol, you will leave UMB’s Web site and go to Web sites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other Web sites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.