FIS Blog

Private equity is about people


Jonathan Broch | Tuesday, September 15, 2015

By virtue of its long-term outlook, private equity, more than any other investment area, brings into focus the things that really matter – people and relationships. When limited partners (LPs) commit to a fund, they enter into a 10-year relationship with a general partner (GP), and may forge a decades-long strategic relationship spanning multiple funds.At the same time, when GPs invest, they take a long-term view of value creation with typically, a five-year holding period.

So, in an industry centered on people and long-term relationships, how can technology–sometimes a poor substitute for quality, face-to-face, personal interaction – help to build lasting relationships? We’ll explore several areas where the greatest benefits can be realized.

Is CRM helping you build stronger relationships?
The first area we’ll explore is CRM – a technology often applied across investor-facing personnel within the organization. And the question to ask is simply: “Is my CRM helping me build a stronger relationship with my investor?” Traditionally, many businesses have viewed CRM systems as a place to track notes, contacts, tasks and appointments. But often, CRM systems fall short in terms of considering the nuances of a given industry such as private equity. For instance, they may not help answer questions such as when capital was last called or distributed, offer the investor’s total value to paid-in capital (TVPI) or internal rate of return (IRR) for a given fund or across funds, or note whether the investor is co-investing in any deals. If CRM isn’t answering these kinds of questions, how effectively is it equipping partners and investor relations people with the information they need for meaningful interactions with investors?

If this resonates, you are not alone. According to FIS’ recent industry survey, two-thirds of GPs deem it essential for CRM solutions to provide investor-facing personnel with a financial view of an LP’s investments, as well as traditional features such as tracking contacts, notes and meetings. This requires centralizing data on investor commitments, partnership allocations and cash flows together with investor data, contact information and notes. Years ago, this was difficult to achieve, but private equity solutions and capabilities have evolved to make the goal attainable. Partners and investor relations personnel can now spend more time on building relationships and less on pulling together information to gain a complete view of an account.

How are you coping with demands for data?
The second area that we’ll focus on is the investor portal, an external-facing technology that investors use to access information from their GPs on a regular basis. We’ll examine how investor portals can help service demands for data in a more timely and efficient manner, and the effect this transparency has in building healthy, long-lasting relationships. It’s no secret that LPs have become increasingly demanding. About half of GPs say LPs are more demanding in the information they seek about investments than in the past, and a third of GPs say LP demands can be unrealistic at times. This will not let up any time soon. FIS’ latest research shows that 87 percent of LPs want to increase the level of monitoring they perform on underlying portfolio companies.

As a result, GPs spend a significant amount of time preparing custom reports and responding to ad hoc requests. FIS’ research revealed that around one in five GPs say they have increased resources to cope with LP information demands, but traditional ways of servicing LP requests have become antiquated and only scale up to a certain point. Instead, many GPs are rethinking how their investor portal can help provide LPs with more open and transparent access to investment information, while alleviating the burden placed on back-office resources. Rather than limit the investor portal to a library of historical reports, GPs are taking full advantage of technology and providing LPs with a centralized source of reconciled data, where LPs can slice and dice to the level of detail required. Dashboards make it easy for an LP to interact with key information and drill-down capabilities allow LPs to view further details, or to export structured data and avoid rekeying information into internal systems.

This level of transparency is not only healthy, it also provides LPs with a more expeditious means of gaining access to information. Technology shouldn’t – and never will – replace people and relationships, but it can absolutely make those interactions more efficient and support the flexibility and openness that is fundamental to healthy GP/LP relationships.

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