Cultural buy-in needed for switch to digital framework
As terrible as the Covid-19 crisis has been, it has forced private equity players to accelerate their adoption of technology to replace previous practices. This will likely be the impetus needed for full implementation across the industry.
“As an example, in June 2020, the US Department of Labor issued guidance effectively opening the door for plan sponsors to add private equity funds to their 401(k) funds. While there are many viewpoints on the risks and rewards, the democratisation of private equity to the ‘Main Street’ investor will force industry participants to leverage digital platforms to accelerate data access and investment decisions.” says Dr Daniel Schmidt, Founder and CEO of CEPRES.
“We are seeing a general trend for the wholesale adoption of technology as an integral part of a holistic framework for private equity investing,” observes Christopher Godfrey President of CEPRES and Chief Innovation Officer. For this to happen extensively however, there needs to be cultural buy-in from PE investors to switch from their legacy processes to a digital framework.
CEPRES, a Fintech firm, has been supporting this progress through development of tools and innovative technology solutions which can help improve efficiency in PE front office functions, particularly in deal-making.
“For decades, both LPs and GPs longed for secure technology which would allow them to exchange detailed transactional private equity data. Now this is possible through the CEPRES Digital Data Hub. This empowers LPs and GPs to finally wean off old fashioned and unreliable PDF scraping and manual data entry to support their investment decisions. It is amazing to think that personal investors with USD100 of Apple stock could get more reliable and digital investment data than USD100 million institutional investors in private equity funds!” remarks Schmidt.
Godfrey notes that the technology conversation within PE has now moved to front office functions, as the back-office processes have long been solved for GPs. “What has been lacking is innovative technology for the front office, especially for deal making. While some solutions have helped around specialised CRM and web crawling for company information, what has been missing until now is true deal underwriting and due diligence solutions,” he comments.
Working with Bain & Company, CEPRES has developed the first of many specialised solutions that directly support deal teams at GPs and advanced LPs, who invest directly- or co-invest with sponsors. Schmidt explains: “Especially in the current volatile markets, having empirical tools and data that help GPs choose the right deals, price them appropriately and provide banks trustful comps & fact-based analysis that support the underwriting of lending will be critical as we progress through this crisis.”
Daniel Schmidt discusses the support CEPRES has provided clients over the course of the Covid-19 pandemic: “For our LP clients, transparency has become critical to understand the impact Covid-19 will have on the Asset side of the ALM equation. LPs rely on private equity to generate alpha to help underwrite their liabilities, but they can also have asset allocations covenants linked to NAV, which may demand rebalancing of allocations with their other investments in case of write-downs. Working with their GPs, our technology has helped accelerate and ease the burden of accurate reporting and detailed analysis to help make the right decisions in a timely manner in this challenging time.”
Dr Daniel Schmidt
Daniel Schmidt is the CEO and Founder of CEPRES. He has more than 20 years’ experience in private equity investing and corporate business development. Before founding CEPRES, Daniel served as Managing Director at Deutsche Bank Private Equity Partners and led the buyout of CEPRES from Deutsche Bank in 2010.
Chris Godfrey is President of CEPRES Corp and responsible for all North American business, Product Management and Marketing functions globally. Chris has 18 years of experience in the private markets industry. His career is focused on driving change in finance through transformational technology.