Private capital must adopt a common language or taxonomy for data reporting if it is to support more timely and insightful decision-making in the investment process, according to business advisory firm KPMG UK.
The call comes as KPMG UK publishes its report titled ‘Improving data exchange fluidity between LPs and GPs’, in partnership with the Private Capital Data Standards Alliance (PCDS Alliance – formerly ADS Initiative), the membership organisation that supports the collaboration of private capital stakeholders to develop global data standards in the industry. The publication coincides with KPMG’s appointment as a founding member of PCDS Alliance.
The report consulted the views of global asset allocators and investors with over USD1.2trillion in assets under management across Europe, Asia and North America. It found that information flows between investors and managers continues to produce challenges in terms of time and resource, as well as ability to elicit value-added insights efficiently and effectively as a result of legacy data structures.
Zeynep Meric-Smith, Partner and Head of Private Assets Consulting at KPMG UK, says: “There is an incredible appetite from institutional investors to increase allocation to private assets, including private debt, infrastructure, real estate and private equity. Yet there is an opportunity cost here because of laborious legacy processes and technology that hinder insight-led decision making that could otherwise support better investment allocations.
“We’ve taken time to gather views from across the industry to really understand the challenges at play. For LPs they are looking for granular data in specific formats that they can leverage for portfolio analytics, value for money assessments and reporting to stakeholders, but often receive inconsistent, and unstructured data that requires significant resource to work through. Even some industry-driven templates are not widely adopted and patchy in their application. For GPs, the data requests are often unaligned to their other reporting requirements, take valuable resource away from their own investment and management activities and can vary greatly from needs investor to investor.
“The message we received is clear – there must be far greater consistency in the data needed for reporting. For us, that means the industry’s priority should be in creating a common language – a standard set of data requirements and definitions of those data points. This is something we’ve seen developed in other areas of financial services, such as banking. It can lead to far fewer mistakes, lead to more granular data being captured, speed up reporting and offer clarity in its consistency. But crucially it will provide an incredibly important foundation for developing common software platforms, driving automation and self-service tools and free up teams to focus on driving value in their respective functions.
“It is a form of data empowerment that will prove valuable for both LPs and GPs – further improving communication, transparency and relationships, and freeing up resources to focus on getting the best outcomes through each stage of the investment life-cycle – from entry to exit. Now’s the time for the industry to come together and form a consensus on data definition and reporting. A common language will ultimately enable managers and investors to scale up more efficiently and benefit from the surging interest in these asset classes.”
Lorelei Graye, president of PCDS Alliance, says: “The creation of our alliance is an important step in formalising data standards in the industry, something that increases transparency and accountability, and is in the interests of investors and managers alike. We warmly welcome KPMG into the fold. As a recognised global leader in the financial services sector its presence as a founding member of PCDS Alliance underlines the importance we see in this partnership and will encourage others to follow suit.”
