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PE firms grappling with turning data into business intelligence, says study

Private equity firms are struggling to disseminate data into market intelligence, according to research by strategic advisory and analyst firm TABB Group and SunGard.

When asked what prevents them from managing their business effectively, the top responses from fund managers or general partners (GPs) were: the time it takes to get a complete view of portfolios (57 per cent); a lack of front-to-back system integration (50 per cent); and a lack of frequent and timely reporting (50 per cent).
 
The survey found an overwhelming majority of firms (67 per cent) acknowledged that an investment management platform is either “very important” or “extremely important” to achieving operational efficiency.
 
The survey found that only 23 per cent of participants currently provide access to interactive investor reporting. However, 70 per cent said it is important to do so, and one-third of the firms said producing on-demand performance reports is challenging. The research also found that the private equity sector faces increased levels of regulation, compounding the burden on data management. Nearly all of the survey participants are currently challenged by regulatory issues, with 39 per cent finding it “very” or “somewhat” challenging to deal with in present market conditions. To adapt to their increasingly regulated environment, firms need the ability to aggregate and report the right data.
 
Regardless of firm type, access to timely and accurate information on the portfolio was seen as critical to understanding exposures and risks, as well as measuring performance. The importance of making technology a strategic priority stood out, with more than one in four private equity firms estimating that meeting technology objectives would result in considerable improvement or great improvement on the quality of investment decision making; 42 per cent of those surveyed would expect to see some improvement in this area.
 
Lauren Iaslovits, chief operating officer of SunGard’s Investran, says: “The study confirms that private equity firms recognize the value of increased transparency and more effective data management. Increasing stakeholder demands to be kept informed mean that private equity firms need a ready ability to transform data into useful, digestible, reportable information that can be utilized, as well as help to improve the quality of their decision-making. The challenge that many private equity firms still must overcome though is that operational inefficiencies are preventing them from delivering the intelligence they need to support internal stakeholder reporting – and, even more critically, their investment decisions.”
 
The research surveyed 119 senior private equity executives across the US, Europe and Asia. Nearly a third of the responding firms had assets under management of over USD5bn, and covered a wide range of strategies, including buy outs (24 per cent), venture capital (20 per cent) and fund of funds (17 per cent).

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