by Andrés Ramos, Content Marketing Specialist – eVestment Private Markets
To kick off the 2020 conference circuit, members of the eVestment Private Markets team attended the PEI CFOs & COOs Forum in New York.
The two-day event featured sessions and panels that brought together top names and thought leaders in the private equity industry to talk through current themes and important challenges affecting the industry today. Here are some of the event’s biggest takeaways:
Interest in internal technology on the rise
A key focus of the conference was technology and its value in helping firms navigate a changing industry and retain their success. In a panel on day one of the event, EY presented findings from their 2020 Global Private Equity Survey. When the survey posed the question, “How do CFOs want their teams to spending their time?” 75% of respondents answered that they want to see more time spent on technology. This sentiment was buttressed by a live poll conducted during the session. When asked, “What’s on your firm’s radar for 2020?” 34% of the audience responded with Operational Infrastructure and a further 23% answered Cybersecurity.
For many managers, their interest in operational infrastructure is focused on technology tools that help with the “blocking and tackling” at their firms: the basic and fundamental roles and tasks that keep an organization running smoothly. Many managers are keen on automating and streamlining items like fund accounting, fund administration, and general ledger related processes. Others are looking to bolster their portfolio analytics capabilities with tools like eVestment’s TopQ, which was highlighted by an LP on a panel about driving value for investors.
With regards to cybersecurity, most firms are leveraging outsourced IT services and outside consultants to set-up, monitor, and stress-test their digital defenses. Increased awareness and focus on cybersecurity may be in part a result of seeing the impact of lax security first hand: in another live poll, 72% of the audience stated that they knew someone in the industry who had been hacked.
This eye-opening response reinforces the need for robust cybersecurity across all aspects of a fund manager’s business – including the secure storage and management of sensitive and propriety data, such as performance and investor data.
Katey Bogue, Head of eVestment Private Markets, joined a panel about data management at the PEI CFOs & COOs Forum.
Big Data’s value is unlocked by people
As revolutionary and game-changing as Big Data might seem to the rest of the business world, the private markets’ view is much more pragmatic. When asked by a moderator, “do you see Big Data as a key to success in the private equity industry?” panelists acknowledged its value but emphasized it will not be a complete replacement for the human element of private equity investing. “How would you use it to source ideas?” remarked one panelist. Most agreed that Big Data affords GPs the ability to look at data more granularly but that the value-add is still dependent on how people are utilizing it. In order to get the most out of Big Data, many firms are hiring professionals with Big Data expertise for their investment or deal-making teams. This reinforces the sentiment that Big Data will be additive, not a substitute, for humans in the private markets.
LP opinions on…
The forum offered GPs an opportunity to hear LPs sound-off on important industry topics. Here are some of the notable sentiments from LP panelists at the event.
…the use of lines of credit
“We hire you [GPs] to make money. So if you’re using [lines of credit] to streamline processes and if you think it will help, you should use them. But if you’re using them to make an early distribution to LPs, that’s not a great use of a line of credit.”
…private fund managers adding new strategies
“It’s ok to add a complimentary strategy with the right team. That makes sense versus blowing up your fund size. In our view, a manager can maintain performance from one fund to the next with up to 150% asset growth, anything larger, and we find that the performance goes down. So in this sense, adding a new strategy can be a better option. But if a new strategy launches without adding new hires, that is an issue. That means our PM is not fully dedicating his time to the existing strategy.”
…the importance of an airtight pitch deck for fledgling fund managers
“LPs are looking for reasons to say no on something like a weak deck or lack of data. There’s a certain standard for how information is presented, make sure you meet that standard.”
A bigger picture view on diversity
Talk of the importance of diversity is a regular feature of industry panels and conferences but some interesting views were offered up at the CFOs & COOs Forum. Whereas diversity is traditionally thought of as differences of gender, race, religion, ethnicity, et cetera, some panelists spoke about their increased focus on socioeconomic diversity and diversity of experience. The point was made that while some firms may look diverse “on paper,” many employees have come from the same socioeconomic backgrounds, gone to the same schools, and held the same types of jobs, in theory not actually being diverse, and limiting the diversity of thought and viewpoints they bring to the table. By focusing on socioeconomic and experiential diversity, firms are working to ensure that they truly offer equal opportunity and are diverse in every sense of the word.