FIS Blog

Will Your Private Equity Firm Still Be in Business in 2020?


Tony Chung | Thursday, September 1, 2016

Not to scare you, but we can already see 2020 on the horizon, and it’s bringing with it some challenges for private equity firms. At least, for the firms who aren’t ready to adapt and take a flexible approach to the changing landscape of the private equity sector. 

From our industry research and years of experience working with a variety of general partners, limited partners and third-party administrators, we think that private equity firms who are not actively seeking to add value in new ways and leveraging data to drive customer experience need to take a hard look at whether or not they’ll be able to remain competitive in the market.

Of course, that’s not your firm. Right? You want to stay competitive and continue to grow.

So, where should you focus?

On diversifying and expanding services

Our 2015 private equity market research effort found a significant number of GPs plan to launch a broader range of funds: 96 percent either said they will definitely do so, or are considering it.

Amidst growing competition, diversification makes sense for GPs. With limited partners now increasingly looking to build closer relationships with a reduced number of general partners, the firms that are able to offer the broadest array of investment options will be best positioned to capture further market share.

Survival tip: adapt your strategy to account for more diversification.

On leveraging investor portals as an opportunity to differentiate

Most GPs understand that investor portals are an important part of their relationship with LPs, but many need to rethink and broaden their approach. Currently, 67 percent of GPs view investor portals mainly as a way to fulfill their obligation to provide a reporting service. Changing that mindset so you view portals as a chance to differentiate your firm and add to your investor experience is a great opportunity.

If you’re not already considering that, however, you may be playing catch up. Our research found that 33 percent of GPs are in the forward-looking category – perhaps even past 2020 – and see their investor portals as having the potential to do much more. Firms are looking to futureproof their investor portals by focusing on new ways to provide non-static information and to reinforce their brands to enhance the overall investor experience.

In this vein, one of our research respondents told us: “We will need to continue investing in our technologies to improve relationship management and reporting because we have to tailor our platforms to make them work for us on a bespoke basis.

In other words, ignore your investor portal at your own risk.

On streamlining data management to flex up and meet investor demands

LPs have their eyes on the horizon, too. They’re seeking to manage their private equity exposures more efficiently and effectively – as well as their increasing allocations to other alternative asset classes. To do this, they are looking for greater volumes of more detailed information. Consequently, the pressure’s on for private equity GPs to increase data and reporting transparency.

From our 2015 research, one limited partner told us: “General partners should know that keeping limited partners happy through regular interaction and proactive reporting is something that is ever more important in the current environment.

It’s hard to provide proactive reporting without an automated technology solution to streamline the process. And you don’t need to take our word for it – our research found that 96% of LPs believe technology can provide efficiencies so they can best use the skills and competencies of their staff. Translation? Automated, streamlined reporting means less resources and effort spent on manual data management.

One of our research participants hit the nail on the head when describing how important improving reporting is to survival: “As the data available increases in both volume and granularity, robust technology is becoming ever more crucial.

Staying alive, staying alive

With the ‘20s roaring toward us, we are seeing private equity market participants taking a hard look at how they will evolve to not just survive but to remain competitive in the future. With a focus on diversification, interactive experiences and on-demand data, private equity firms can position themselves to win in the coming years.

For more insight into the pressures facing private equity firms today, view our slideshow: For Private Equity, The Pressure’s On.

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Tagged in: Institutional and Wholesale, Investran, Private Equity Fund Accounting Technology, Private Equity Long Term Strategy, Private Equity Reporting Solution

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