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Limited partners and the quest for data: the view from the Netherlands

23 March 2021

Mark Roerink

Service Line Director, Funds, Netherlands

Mark Roerink

Service Line Director, Funds, Netherlands

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The frequency of insights that limited partners expect from their general partners is growing fast – particularly in the Netherlands, where ESG and diversity reporting are a prime concern.

In our recent survey of more than 300 private capital CFOs from around the world, conducted in partnership with Global Custodian, we found that respondents in Western Europe expected deeper engagement with ESG as well as diversity and inclusion from their limited partners (LPs).*

The Netherlands is no exception – with just a few differences.

If we take a look at the largest general partners (GPs) in the Netherlands, a focus on diversity reporting is something that has been implemented across the board.

Engagement with ESG criteria is also a priority; indeed it is essential. In the Netherlands, if GPs don’t report ESG data, pension funds will simply not invest. As a result, these GPs are feeling the pressure from their investors.

But everywhere – not only in the Netherlands – the intensity and volume of questions that LPs are now asking their GPs has grown. And it’s set to increase further.

Dissatisfied LPs may walk away

Respondents to our survey anticipated a sharp rise in reporting demands from their LPs in the next few years, particularly for daily or even live updates.

For their part, GPs would rather focus on managing their investments than on having to answer LPs’ questions all the time. But at the same time they also realise that if they don’t properly address LPs’ needs, those LPs are less motivated to invest in their new fund.

The situation is further complicated by the absence of a standard approach. There is no central organisation to rule on one or to set a minimum threshold for data delivery.

I believe GPs should work more on more standardising certain key performance indicators, particularly when it comes to pension and state funds, for which regulatory compliance requires more data to be provided to investors compared with other types of funds.

The pitfalls of data hoarding

There is another side-effect that has emerged as a consequence of the soaring demand for data from LPs: data hoarding.

For example, LPs may demand a data feed for all historical data so they can store it on their local server for internal purposes.

Allowing LPs to store all this data may reassure them – however, this definitely requires a sophisticated approach. It is so important to maintain and organise this data properly – and GPs should make this their priority so that they can retrieve information when it is requested.

This raises the bar still further for GPs, with the fear that LPs will take their business elsewhere if their reporting requirements are not met, particularly in the case of larger funds.

GPs must also ensure that all reporting to regulators is completed properly, or they could face substantial fines. In addition to the negative financial impact, this also brings reputational damage, which GPs cannot take lightly.

Agile technology and global reach

Administrators such as Intertrust Group are learning about and adapting to these major changes that will overhaul the way the industry operates.

Thanks to the capabilities we have developed and our solid track record, we are able to react quickly compared with competitors who have to source third-party applications. We also have a truly global reach that allows us to leverage our local experts to navigate the complexities of local regulations.

My message to GPs, whether they are in the Netherlands or not, is to be prepared. Don’t risk being too complacent because everything seems to be in order at the moment. You need to have a wider horizon.

How Intertrust Group can help private capital and hedge funds

  • A global network of local experts to navigate local regulations
  • Solutions designed to meet specific client needs
  • Capability and track record to deliver solutions fast

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*Source: Global Custodian in partnership with Intertrust Group; a global sample of 300+ chief financial officers at private capital funds were surveyed between 20 November 2020 and 26 January 2021, including 88 in the US