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Between 2010 and 2020, alternative investments skyrocketed in popularity, with private markets ultimately seeing AUM more than double within the decade. In that time, many institutional investors who turned to private markets in search of higher yields became more confident with these highly illiquid and complex investments, scaling up their allocations while learning what opportunities were best for them.
Now, with a seasoned crowd of LPs eager to perform complex analysis on their growing alternatives allocations, many GPs are finding themselves awash in LP requests for data and custom reporting. For some GPs, the influx of requests has been confounding and hard to manage while also keeping LPs satisfied.
So, what’s behind this uptick in LP requests and what can GPs do to meet those evolving data needs?
This phenomenon can be attributed to several interconnected causes.
LPs may find themselves attracted to the returns that private investments provide, but considering their past heavy reliance on exchanged-traded assets that offer data transparency on a minute-to-minute basis, the inherent lack of transparency that accompanies private market investments can be hard to stomach. Plus, certain large LPs like pension funds may receive pressure from government bodies to provide more detail as their allocations to a non-transparent asset class grows.
Many LPs are also increasing their commitments to ESG goals and benchmarking – activities for which data is essential. As they grow their allocations to private investments, they are finding themselves with significant blind spots in their portfolio analysis.
In a world where we’ve all become accustomed to having all kinds of data at our fingertips – from our daily steps to our monthly personal spending – sorting through GP email communications in search of static data reports (often delivered a full quarter in arrears) feels especially lacking to many. And our increasingly distributed workforces, thanks to the Covid-19 pandemic, have made automated and transparent data collection processes table stakes for any value creation strategy. As the number of private asset managers continues to grow, causing competition to ramp up, GPs will find data access and transparency to be an increasingly important differentiator in attracting investors and motivating them to reinvest after the current fund winds down.
Given LPs’ increasing sophistication as well as growing manager competition, GPs can turn to capable portfolio monitoring software built around keeping all stakeholders in the know. Allvue’s Fund Performance and Portfolio Monitoring solution enables GPs to collect disparate streams of data across the front, middle, and back office, bringing them together in one place for analysis and private equity reporting. From there, it enables simple distribution to stakeholders of all kinds, notably LPs.
Let’s look at the solution’s features that answer to LPs’ evolving needs for more data and insight into their private investments.
Besides bringing all fund and Port Co data together in one place for GPs’ own benefit, Allvue’s Fund Performance and Portfolio Monitoring solution also allows GPs to configure automated reporting levels for investors. As opposed to fielding endless requests for bespoke data from LPs, GPs can empower them to self-serve their data needs with the help of the solution’s customizable reports delivered through Allvue’s Investor Portal.
In this case, both the LP and GP save time and avoid manual work since LPs have proactive access to fund and Port Co data and dynamic reporting filters. With this access, they can quickly pull down the reports they need at a moment’s notice and bring that data into their own platforms to analyze with their broader portfolios.
While the idea of ESG investing has existed for a long time, industry awareness and adoption of ESG has surged in the last few years, including in private markets. For many LPs, ESG is not just a matter of investing responsibly — it’s also a matter of ensuring better performance. According to Private Equity International, 74% of LPs believe adopting a strong ESG policy will lead to better long-term returns in their private markets portfolios.
Investing with ESG values in mind requires reliable data streams and constant access to that data. Allvue’s Fund Performance and Portfolio Monitoring solution allows for ESG KPI tracking and reporting, enabling LPs to create and collect an unlimited number of metrics and pull reports on a Port Co and fund level to conduct reporting on ESG-specific metrics in their own portfolios, tracking how these KPIs ideally improve over time.
Designating a central location for all LP communications is an essential part of setting your LPs up for success. It can be challenging for LPs to keep up with the many email communications sent from GPs – from capital calls and distributions to quarterly statements – especially when considering they receive these communications across all the GPs they’ve invested with.
As part of Allvue’s fully integrated platform, GPs can share custom dashboards via the Investor Portal solution, providing LPs with direct access to all the benefits of Fund Performance and Portfolio Monitoring — including the ability to access securely shared documents, download any fund or Port Co data, and bring that data into their systems for their own analysis.
Allvue’s Fund Performance and Portfolio Monitoring solution is designed to empower you to marry data across the front, middle and back office, bringing it together in one place for analysis and distribution to stakeholders both internal and external.
As you feel the competition in your field heat up, nailing the data and performance transparency angle in LP relationships is an important way to set yourself apart. Not only do you equip investors with access to all the fund and Port Co data they could need, but you can do so in a way that requires no manual work, freeing up your teams to focus on more strategic tasks.
Learn more about how Allvue can help your business break down barriers to information, clear a path to success and reach new heights on the investment landscape. Fill out the form below and we’ll reach out to talk more about how we can help your business.
At Allvue, we’re committed to harnessing technology and expertise to tackle the biggest challenges facing the private capital space. Our Resources hub, offering blog articles, whitepapers, case studies, videos, and more, shares industry best practices and reflects the experience and learnings of top Allvue experts and our partners motivated to see this industry continue to grow and thrive.
Our goal is to provide guidance as well as food for thought for anyone interested in the private equity, venture capital, private debt, and public credit spaces – whether you’re learning the fundamentals or getting ready to raise your fifth fund. Many of our articles contain links to trusted third-party resources to support our takes, and all our content is regularly reviewed and updated to keep current with the fast pace of alternative investment innovation.