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A key aspect of private equity reporting is keeping your investors informed and up-to-date on your portfolio companies. One critical aspect of maintaining this knowledge is through regular investor reporting. These investor reports act as a necessary communication channel between the private equity firm and its investors, providing crucial updates on investments and progress towards achieving strategic goals.
What is investor reporting?
Investor reporting is the process of sharing information with investors on the performance of their investments. It is a crucial communication tool that allows investors to stay informed about their investments, track their progress, and make informed decisions.
Investor reports are typically shared with limited partners in private equity funds. The reports can be periodic or on an ad-hoc basis, depending on the fund’s structure and investment strategy. They are usually comprehensive and transparent, providing investors with a detailed analysis of their investment’s performance, opportunities and returns.
Investor reporting is also increasingly difficult. In a world where the volume of data keeps increasing, flowing in from disparate data systems and out to a widening number of stakeholders, executing timely, accurate reporting on a recurring basis is a challenging task.
Given this growing need, we’ve put together this guide to investor reporting – acting both as an in-depth primer on all things investor reporting related and as a resource hub to help you jump start your reporting needs.
Investor reporting has, for many firms, become an increasingly complex and time-consuming process, and GPs face several challenges when preparing and delivering investor reports. Some common challenges include:
As Mike Trinkaus, CEO and co-founder at 4Pines Fund Services, put it to us, “The biggest challenge facing a GP today is data.” Private equity firms often manage vast amounts of data, and ensuring that data is accurate and up-to-date can be challenging.
“The biggest challenge facing a GP today is data.”
-Mike Trinkaus, CEO and co-founder, 4Pines
And beyond the amount of data, the movement of it between stakeholders is also a major complicating factor. “For GPs, moving data between service providers, auditors, lawyers, compliance teams and other internal and external stakeholders is a real challenge,” Trinkaus added.
Gathering data from administrators, service providers and portfolio companies, verifying it, and consolidating it can be a laborious and time-consuming process, and can be one of the most significant challenges of managing investor reporting.
Communication between private equity firms and their investors can be challenging, particularly when managing large numbers of investors with varying requirements and expectations. Add in other 3rd parties and service providers who need access to specific reports, and trying to keep a manual list of these ever-changing access requests can prove challenging, risky and time consuming.
Investors expect timely and regular reporting, and private equity firms can face challenges meeting these expectations. The illiquidity of alternative assets and the complexities of private equity fund accounting can make reporting a tedious, laborious process, particularly when managing a large and diversified portfolio.
All the challenges of investor reporting are further complicated by the very real cybersecurity risks both GPs and LPs face, often defending against spoofing and phishing attacks levied via email and other unsecure communication platforms. 33% of GPs still distribute sensitive information via e-mail, leaving them and their LPs open to a variety of security hazards.
READ MORE: 4PINES ON WHY CO-SOURCING IS THE FUTURE OF FUND ADMINISTRATION
Private equity firms typically provide a wide variety of investor reports. Some of the most common include:
DOWNLOAD: SAMPLE PRIVATE EQUITY REPORTING TEMPLATES
Investor reports should include a range of information to provide investors with a clear understanding of the investment’s performance, along with their positions and returns. Some of the critical elements that should be included are:
Because investor reporting is an essential part of the private equity ecosystem, it both influences and is influenced by other trends in the industry. Here are a few of the top trends in investor reporting in recent years:
Accelerated in part by COVID and the increased need for information, private equity firms have become more transparent in their reporting, providing more information to investors about their investments and performance. While in part driven by investors’ increasing demands for transparency, GPs have also furthered this trend along in an effort to build trust with their investors.
There is a growing trend towards focusing on long-term value creation in investor reporting. In the recent tumultuous market environment, many private equity firms have started providing more information on how they are working with portfolio companies in order to create long-term value, including details on their strategies, operational improvements, and other initiatives. This is information LPs are looking for that can help them determine if they will re-invest or re-up with a particular fund manager.
Technology is playing an increasingly important role in investor reporting, with private equity firms leveraging tools like investor portals, dashboards, and analytics to provide more timely, customized, and accurate reporting to their investors.
This embrace of technology is part of a broader move towards digital reporting. Finally overturning decades of precedent, where the norm was to mail out reports via hard copy – a preference that for many continued long into the digital age – many investors now prefer to or even require that they receive reports digitally. Much like retail banking, investors now expect their data and documents to be consolidated and available via an online portal. This trend is driven by a desire for greater efficiency and speed for both the GP and LP, as well as greater convenience and security in the reporting process. And it is facilitated by the significant automation capabilities purpose-built software now makes possible.
WATCH 2-MIN DEMO: ENHANCING YOUR INVESTOR EXPERIENCE
Investor reporting is, in many ways, a very labor-intensive task, and technology can therefore play a crucial role in streamlining the process and helping private equity funds to overcome the challenges they face.
A few of the ways that technology can facilitate investor reporting include:
LEARN MORE: HOW INVESTOR PORTALS BENEFIT BOTH LPS AND GPS
Investor reporting is critical for private equity firms to communicate their investments’ performance and progress towards objectives to their investors. And, increasingly, investor reporting processes require the right technology to make them scalable and error-free.
Allvue’s Investor Portal software solution offers a powerful and flexible option for firms. Available as both a standalone solution and as part of an end-to-end, fully-integrated platform, Allvue can help emerging managers and enterprise firms alike streamline their investor reporting workflows.
Our Investor Portal comes with a handful of distinct features that set it apart from the competition:
Reach out today to learn why Allvue’s Investor Portal is already accessed by over 90,000 users from the world’s leading institutional investors.
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