Investor demands drive technology adoption in PE

Jill Calton, UMB Fund Services

Private equity managers are being driven along the curve of technology adoption by greater institutional investor interest in the asset class. Managers are having to re-fashion their approach to data to ensure they can meet their clients’ demands with ease and simplicity in a scalable manner.

“You’re seeing more institutional investors allocating to private equity and their needs go beyond what an individual investor might have needed. They have specific and unique requests for information,” notes Jill Calton, Executive Vice President of Alternative Investments at UMB Fund Services.

PE managers have been motivated to adopt technology solutions to ensure their institutional clients’ needs are met. Calton gives examples of what these requirements involve: “Broader information reported out on statements, for example. Many times, investors want data fed directly from the fund into their internal systems. There needs to be compatibility among the data, and the manager needs to have the ability to transfer it.”

She describes fund managers’ efforts in this regard and their focus on how to adapt and respond to these demands in an efficient way: “They cannot be moving mountains every time someone needs a unique piece of information or asks for a specific report. This limits what they can handle if they’re still pulling data from multiple systems or from spreadsheets.”

By and large, private equity favoured more manual processes and excel spreadsheets. According to Calton: “This was primarily due to a lack of system availability to meet the special needs of private equity managers. Spreadsheets continue to be very flexible, however, not sustainable.”

Calton comments, “It is not sustainable given the greater information and data needs of institutional investors. Managers relying on spreadsheets are at higher risk of errors occurring. There are no automated processes, controls or system design that prevent errors. It’s manual and it’s inefficient.”

For the best chances of success, private equity managers need to have a system which maintains the underlying fundamental information in a way that’s easy to track and simple to query. “Managers need data they can rely on. It has to be accurate,” warns Calton.

Sheer volume of information

Managers can face a number of hurdles in making this switch. The most significant is related to the sheer volume of data they would need to transfer and how far it dates back. In Calton’s words: “One of the big issues is that there is a history involved with these funds. Some have many years, if not decades of information. In order to consolidate and maintain that history, you have to include fund information back to inception for data to be useful and provide what managers and investors need.”

The data is usually not just ample, but also would have been tracked across multiple systems or held by different providers. Extracting that data and consolidating it all down into a single platform is a challenge. “It takes a team of people dedicated to getting it done. Also, the longer a firm waits, the harder it’s going to get,” Calton says.

Cost is naturally another concern. Investors are demanding more for less and fee pressure in the industry remains considerable. Managers need to think about how much they can afford to invest in such a system while maintaining their operations and generating the returns they need.

Given the adoption of such a system is a big undertaking, managers need to make sure the investment is worthwhile and the final product gives them what they need. Calton advises: “Is it expected that managers ask why they should invest time and money to do something like this. They want that assurance that it is going to be worthwhile. The only way to get that reassurance is developing a well-defined strategy. They need to identify what is most important to them, in terms of the data they want to have maintained and tracked.

She adds managers need to understand how their information is being maintained and stored today: “Is it multiple systems that you would have to tack together to get what you need? Also, how transportable is the data various third parties are maintaining for you? Considerations should be made for ease of conversion if managers deem it necessary or prudent to change platforms or providers. It is crucial that the information is accurate, accessible and transportable if and when the time comes for change.”

A single system

UMB has helped PE managers work through this data consolidation process: “We’ve worked with clients through a process of consolidating all of their information into a single platform or backend system that they maintain because they want to have all of their information in one place.

We worked closely with them to customise data feeds directly to their in-house systems. That data needs to be shared on a daily, weekly, monthly basis, whatever they need to access what they need when they need it.”

The firm’s AltPro® platform has the ability to assist PE managers looking to carry out this consolidation exercise. Calton elaborates: “We maintain and develop a proprietary accounting system specifically for alternative investment funds. Our mission is to have one system which could do everything for a private equity fund from start to finish.”

Managers can see all their investor and fund information in one place. They can see how things are allocated out to investors, how fees are calculated. Calton adds: “It puts our clients at ease knowing everything is maintained, accurate and easy to access. Also, we’re able to turn information requests around a lot faster because we’re not trying to maintain multiple systems or feed data across different systems. 

UMB’s AltPro has an online portal that sits on top of this accounting system to offer clients greater accessibility to data. “We want our clients to have access to their information 24 hours a day, seven days a week. They should be able to log in, see their account and have access to all of their data – from the investors to the accounting, through to the investments,” Calton concludes. 


Jill Calton
Executive Director Alternative Investments, UMB Fund Services

Jill Calton oversees alternative investment servicing at UMB Fund Services. In this role, she provides leadership and oversight to all of the Company’s alternative investment client-servicing teams. Jill holds bachelor’s and master’s degrees in accounting, plus a minor in mathematics, from Weber State University. She is a certified public accountant and a member of the Utah Association of CPAs. She also serves on the Hedge Fund Association’s board of directors.

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