Ever-growing demands for private equity data create a potential advantage for forward-thinking fund managers.
There’s clearly an appetite for more reporting and transparency in private equity, as our Halo Report shows. The sector is following a well-worn path towards democratization of data. As data-driven tech companies such as Google and Amazon make data available to anyone who can access the internet, today’s private equity investors also demand more access to fund information.
Private funds have not previously faced requirements from limited partners (LPs) for constant live data streams, but the trend is accelerating. This presents progressive fund managers 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, bringing heightened expectations of information flow and reporting. They’re familiar with the world of mutual funds with access to daily Net Asset Value assessments via data-intensive solutions such as a Bloomberg terminal with real-time updating. This information is easy to digest and readily available.
Another factor is generational change. A younger generation expects instant data from banks, public companies, and news organizations. 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 there. The data exists, why isn’t it at their fingertips?
A proactive approach to private equity analytics
Of course, not all investors are the same. Some LPs take a traditional approach to receiving private equity data. They’re comfortable that their investments are locked up for the long term and happy with less frequent reporting, leaving day-to-day fund management to the managers. For these investors, annual or quarterly reports are enough.
But 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. They want access to everything including management fees, operational costs, and how an underlying portfolio company is performing. If there’s a charge they don’t understand, they’re quick to question it.
An appetite for data transparency
This isn’t simply micro-management. 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 want better-quality data to help them understand how they achieved their returns. Further, regulators are pushing for more transparency as well. In May 2023, the U.S. Securities and Exchange Commission (SEC) announced that it adopted amendments to enhance private fund reporting to provide more visibility and transparency for investors.
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 when they need it, ideally through easy-to-use client portals.
Regardless of data demands, investors put capital into private equity to maximize returns. While investors will always appreciate more information, fund managers must find the optimal balance between giving them 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.
Why CSC
CSC provides tailored administration and strategic outsourcing solutions to support the complex operations of alternative asset managers across jurisdictions and asset types while adhering to global regulations and compliance. A market leader, we work with funds of all sizes, from start-ups to the largest and most experienced fund managers in the world. Founded in 1899, CSC prides itself on being privately held and professionally managed for more than 120 years. We are the trusted partner of choice for more than 90% of the Fortune 500® and more than 70% of the PEI 300. CSC has office locations and capabilities in more than 140 jurisdictions across Europe, the Americas, Asia Pacific, and the Middle East. We are a global company capable of doing business wherever our clients are—and we accomplish that by employing experts in every business we serve. We are the business behind business®. Learn more at cscgfm.com.