As LPs grow more sophisticated, the investor relations staff must be able to answer increasingly complex data requests.
In a perfect world, investors would never make any one-off requests; the quarterly or annual reports would be sufficient. But the fact is that LPs are more likely than not to demand some detail, some calculation that only they feel is a necessity.
Some firms start to bulk up their standard reporting in an effort to address any and all possible inquiries, but there’s always a few investors that still pick up the phone to request an extra data point. Today’s LP data requests are more complex than ever before and tailored to their own unique investment programs.
The problem is that these one-off requests are rarely the simplest data points to share. The most common one off requests tend to involve summarizing performance stats, often across multiple funds, so that an LP can get a snapshot off their current commitments and IRR. But these requests often leave IR professionals asking the finance staff or the fund administrator to pull those numbers together for them. And of course, no LP is happy to wait a week or two for that data point.
In a recent study of private equity CFOs from E&Y, investor reporting was the third biggest driver of operational complexity at 49%, just behind regulations (64%) and data management (50%). And since investor reporting often boils down to managing data, it’s hard to think the two aren’t part of the same issue.
Which is why many private equity firms are investing in data management technology to help them perform these calculations. 90% of those CFOs in that E&Y survey saw technology as the best way to improve operational efficiency. And it’s why we here at Gen II have invested in a technology offering that’s built to give IR professionals access to the type of tailored performance summaries that so many LPs are requesting.
The reality is that number crunching isn’t just a back-office function anymore; it’s increasingly a core part of any firm’s IR program.