Software designed to help emerging VC and PE firms growFIND OUT MORE
LPGP Connect held their 5th Annual COO/CFO Private Debt meeting in London earlier this summer. Allvue was in attendance to meet and interact with private debt CFOs, COOs, finance directors, C-levelled executives, and other professionals working within the global private debt community.
In addition to mingling with clients, prospects, and industry peers, I also had the opportunity to serve as one of more than 40 speakers at the event, participating in two different panels – “Modernising the Middle Office” and “Leveraging Data & Analytics to Drive Operational Improvement in Private Debt”.
Throughout these conversations, both onstage and one-on-one, common themes like AI, data management, manual tasks versus automation, and LP influence came up. The private debt industry has been grappling with these topics for some time, and their status is always changing. Here are my top takeaways from the LPGP meeting:
Sophisticated data management projects, like data lakes, are underway by many GPs, but the consensus seems to be that we are all still learning how to scale the projects up to the ambitions of the industry at large.
While these are business-critical projects, day-to-day fund operations are still largely carried out via Excel spreadsheets and manual practices, even as capable software exists to elevate accounting and reporting processes. As we’ll discuss more in our next point, GPs will feel the pressure to enhance their ability to access information and turn around reporting requests as LPs raise their expectations and granularity of information for a top-tier investor experience.
“It’s clear that LPs are gaining growing sway over the investor experience they receive from their GPs.”
As private debt operations teams continue to embrace technology and look for ways to bring efficiency to their businesses, they’re facing increasing pressure to support their frontline colleagues who are forced to take on ad-hoc, non-standard LP data requests while still supporting their day-to-day operational workloads.
When we zoom out from this common challenge, it’s clear that LPs are gaining growing sway over the investor experience they receive from their GPs. Even though these requests can at times put major strain on their teams, GPs do not feel as though they’re in the position to say no. This growing influence also extends to side letters, which are becoming longer with more non-standard requests as time goes on.
On both panels I participated in, the go-to examples of AI’s potential impact are on the back office rather than the front office. This suggests that it’s the back office that encounters more manual data struggles, while the front office operations are naturally manual and relationship driven. Allvue’s recent survey backs this up, noting that 70% of GPs credit LP and regulator reporting as their biggest operating challenge.
In the more immediate term, AI should be able to help back-office teams pull together routine investor reporting and answer ad-hoc LP requests. However, we may see AI assist in the future with front-office activities, such as by predicting the success of a potential new investment or in drafting LPAs and side letters.
AI was a common theme in both panels I participated in, as well as in conversations with industry peers. However, the general consensus is that, while AI holds exciting promise for private debt operations, we still have work to do before we can fully embrace it and implement it into daily workflows.
As discussed, the private debt sphere is still mastering its management of fund and loan data. Without impeccably managed data, AI cannot help us to its full potential. But in the next several years, we’ll begin to see the impact of its potential for private debt.
We’re reaching a crucial moment for the private debt industry where LPs have enough sway over their GPs to request new levels of investor reporting, and the GPs actually have the technology, software stack, and workflow sophistication to grant these requests, even if their teams do still encounter challenges keeping pace.
Allvue’s solutions are designed specifically to solve the baseline and fundamental challenges that GPs and loan and fund administrators face in private debt around operational processing and reporting, flexible and ad hoc data generation, and streamlining processes. Our systems allow them to scale efficiently and adapt to changing LP requests.
For more on how Allvue can help private debt GPs, request a demo below or check out of our collection of demos showing our software in action.
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.