One of the most talked about topics at last month’s 2018 Private Equity CFOs & COOs Forum had little to do with investment strategy. With ongoing pressures from regulators and limited partners (LPs), PE firms must dedicate significant time and resources to non-investment-related issues such as increased investor reporting and portfolio company analytics that firms are hoping to solve with technology.
Because LPs want more transparency from their general partners (GPs), the goal for a lot of firms right now is to further automate routine processes—from the way they analyze portfolios, through communicating with investors and delivering data.
Digital transformation over the next five years is critical. At the forum, firms were asked what most drives their need to invest in technology: 40% replied, “investor demands”. Further, EY’s 2017 Global Private Equity survey revealed that process automation is a key initiative. According to the survey, 37% of firms are currently investing in digital data delivery, and 38% are planning to invest in the near future.
As businesses evolve to eliminate spreadsheets and other time-consuming tools, firms are relying on the knowledge base of their internal team members—like project managers and developers—to implement the right-fit technology. According to the EY, CFOs are concerned about the ability of vendors to deliver consistently high-quality service.
Still, utilizing technology for tactical tasks like investor reporting can significantly improve efficiency. CFO’s recognize this and are making technology a priority and, as one GP said, “If they’re not, they should be.” It is important to carefully select vendors, create smart agreements and manage providers carefully.
PE firms have the right tools at their fingertips to tackle increasing demands from regulators and investors. Additionally, they’ve identified their top objectives for the near-term. The goal for PE firms now is to lay the foundation in process automation to help address future reporting challenges, as well as to keep pace with an industry that is undergoing digital transformation.
Learn more about evolving technologies for fund managers.