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In February, Allvue hosted several of its partner firms – alongside Allvue’s own sales, product and marketing organizations – for its 2023 Sales Kickoff in sunny Orlando, Florida.
As part of our many group sessions over the course of three days, I hosted a conversation with Bjorn Jakobsen, Managing Director at Standish Management, and Ben Jamron, Co-Head of Real Assets Fund Administration at IQ-EQ – two of our valuable fund administration partners.
We discussed a multitude of timely topics affecting the private equity fund administration space as of late, including:
Read on for some snippets of our co-sourcing discussion, edited for length and clarity.
Machele: One of the biggest things we need to recognize as a software company is that more than 60% of GP’s are outsourcing today. As a software firm, we want to capitalize on that market share and view co-sourcing as the opportunity to do so.
Before we get your perspective, and I’ll start with you Bjorn, what advice would you give to a new or emerging manager considering outsourcing and versus building an in-house finance and accounting team?
“That’s one of the real values Allvue drives – it’s a solution that has both huge institutional managers’ and emerging managers’ trust.”
Bjorn: It’s been interesting to see this dynamic evolve over my career. If you think about the mid-2000s, everyone started in-house and built out an accounting team. Now, it’s rare for an emerging manager to hire anything other than a VP of Finance or a CFO. So, what does that mean for the software space? These emerging managers are most likely choosing outsourcing, especially if they’re a relatively large launch. And with that, they need technology. I think the market is really fertile for us to continue to partner with you to service these emerging managers because that first fund is really important – they won’t get fund 2 unless they do a good job with fund 1. So, in focusing on performance, they don’t want to be bothered with tech or accounting struggles. That’s one of the real values Allvue drives – it’s a solution that has both huge institutional managers’ and emerging managers’ trust.
Machele: And Ben, how have you seen the role of a CFO evolved over the course of the last decade?
Ben: Today, it seems like the more generalist CFO’s have somewhat disappeared, and these modern CFOs are eager to outsource for the operations they have less experience with. Coming from a company like IQ-EQ, where we offer a broad range of outsourced services, we’re really excited about this emerging dynamic. When you say that 60% of GPs outsource today, I would guess that number for managers in real assets would be about half. So especially for that group, we’re really excited about the outsourcing opportunity, and we think that those who are forward-looking will embrace a co-sourcing model.
Machele: As GPs begin embracing a co-sourcing model, where do you see the biggest opportunities for Allvue to collaborate with your firms?
Bjorn: From my perspective, so many of these emerging managers went directly into outsourcing, which was the right decision as they launched. But many have outgrown a fully outsourced model because they need to have more control over their data, especially since there’s so much more of it to manage compared to nearly 20 years ago when Excel was enough for them. I think that that’s where some of the most fertile ground is. As these managers come back to the market, we’re there to put co-sourcing in front of them, and it’s working.
“A co-sourcing arrangement helps us cut through the clutter – GPs can own their data, they never have to go through a fund administration implementation again, and we can’t hold them hostage”
Ben: When I learned that Standish and Allvue had this co-sourcing arrangement, I sort of scratched my head. My partners and I never thought we’d benefit from that kind of arrangement, but over the course of a year we came around. Fund administration doesn’t always have the best reputation in this industry, and there are so many players we have to differentiate ourselves from and prove we’re one of the good ones. A co-sourcing arrangement helps us cut through the clutter – GPs can own their data, they never have to go through a fund administration implementation again, and we can’t hold them hostage. And if you consider these benefits from the CFO’s role, we make them look good and can help them grow their career. As their role grows, they’re not being dragged down by the ins and outs of tech and accounting – instead they’re focused on making their firm better.
Machele: From your perspective, what really differentiates Allvue as a technology provider and why? Why is Allvue the solution that you are ingrained in?
Ben: We’ve run into co-sourcing situations where the manager chooses other systems. And it’s remarkable to me how those companies want nothing to do with co-sourcing and don’t want us to be part of the discussion. They want to sell them software, set it up, get paid for the implementation their way, and then they’re more than happy for us to come in. That’s been a really big difference that I see in Allvue – the willingness to collaborate. And as I’m sure you’ve experienced, even from our perspective, we’re not completely inflexible. We want what’s best for our mutual client.
Bjorn: One of the reasons I really like to work with Allvue is its rate of implementation in the industry. I think that a lot of CFOs are viewing Allvue as best-in-class, and it seems like you’re winning outside market share. So, from our perspective, that’s obviously a vote of confidence, and we value that the technology is easy to use.
Machele: Looking at our technology, where do you see opportunity for product development or M&A over the course of the next couple of years?
Ben: What I’m most encouraged by is the change in the way that Allvue thinks about technology. For example, consider the revamped investor portal. Before, if we were launching a portal, we’d go through a whole process of designing a document and it would take six to eight weeks. Now the way that it works is you launch a bare portal that we can self-service on our own. That’s the right way to think about technology. Other elements of the platform are going to work that same sophisticated way, and it’s really exciting.
Machele: So, you value more self-service, which in a way puts more work on your plate, but also allows you to own the process and be more involved in delivering exactly what the GP is looking for. And if you think about it, this approach ties right into co-sourcing.
Bjorn: Additionally, anything that can take manual work out of the process is great from a tech perspective, since all fund administrators are resource-constrained when it comes to our people. If you give them mundane work, they’ll do it for a year or two, but eventually they’ll move on. Any technology that can make our staff’s life easier and free them up to work on value-added activities is huge for us.
Machele: And while we’re talking about automation, can you expand on that a little bit further in terms of what you’d like to see?
Bjorn: Yes – a perfect example would be Allvue’s modules with prepopulated journal entries. We can just drop in information and know it will just hit the journal entry, which eliminates the need for the staff to manually book journal entries across all 300 of our clients and each of the funds. The more that we can automate that process, that’s where we feel the benefit.
Ben: The principal reason that we initially selected Allvue is because of the integration of its systems. Before that, we used a different provider and felt their system was behind. From the very beginning from a technology perspective, Allvue has always gotten it right. It’s pretty demoralizing to run a capital process with a mail merge, right? But there are still fund administrators that work that way, despite the fact it’s the wrong way to work and it leads to people leaving, to errors, and to delays. But Allvue already had these things down.
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