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22 February 2022

Private Equity Firms: Do you have the right system functionality?

It is no secret – private markets have experienced record-breaking returns in the past few years. There are many reasons for this growth including the growth in institutional demand, as well as the impact from ever-increasing dry powder. 

Private equity firms are adapting this changing environment by elevating their operational standards, particularly as they contend with complex fee terms and return calculations that present substantial operational issues. For these firms, the process of managing, accounting for, and reporting on a fund is essential to its client satisfaction and regulatory compliance; it is also increasingly important in its ability to compete and grow.

For the modern private equity shop, fundamental technology requirements include five key components:

  • Support for complex strategies and structures: The technology infrastructure needs to be able to support varied and often unique structures while delivering consisting investor accounting and servicing
  • Comprehensive, granular investor accounting: With unprecedented amounts of dry powder, accurately tracking, accounting for and reporting on these flows is vital. Distribution waterfalls, to determine how capital gains are allocated among partners, add a layer of complexity, especially in light of the trend toward closed-end funds in which distributions are highly customized
  • Transparency: A single, end-to-end portfolio investment and investor accounting solution removes integration, data communication, and reconciliation headaches. By monitoring and controlling the relationship between each investor’s capital flows and ultimate investments, the resulting transparency will enable firms to track their investors across multiple investments
  • Reporting: A system that can automatically track the multiple information components that go into the reports, and generate reports in line with ILPA guidelines, will ease the investment manager’s operational burdens while helping strengthen investor relationships
  • Automated close rebalancing: A solution that can automatically rebalance your book following the close of each investment round will be more time- and cost-efficient. It will help reduce operational risk as well, and improve client servicing by minimizing mistakes

For private equity firms, having the right systems and functionality in place is key to overcoming operational obstacles. Resilience and efficiency through automation may well determine how well a firm can manage risks and drive profitability. To learn if your firm has the right system functionality in place, read our whitepaper, or request a demo.