Why GPs need to move beyond Excel to move their firms forward
This article is an excerpt from a feature by Head of eVestment Private Markets, Katey Bogue, that originally appeared in Private Equity Wire’s Technology Innovations Special Report.
Simply put, portfolio performance data is a GP’s most valuable asset.
It is their record of achievement, their recipe for future success, and their best fundraising tool, all in one.
That is why it is unfathomable that most GPs are still relying solely on spreadsheets as their primary tool for collecting, managing, and analyzing their performance data.
From Past to Present
Historically, spreadsheet-based performance data management and analytics meant that any “analysis” was limited by the cumbersome nature of the tool, and the output was centered on high-level performance figures. Fundraising conversations, as a result, also only focused on these numbers.
However, the era of “check the box” due diligence and portfolio reviews has come and gone. This depth of information is no longer enough for GPs or for their increasingly sophisticated and inquisitive investors. Limited partners are now digging behind headline performance figures to get a true understanding of what drove performance and whether or not it is repeatable.
A Catalyst to Demand
The Global Financial Crisis was a key catalyst in this trend, and the current market crisis is acting as a further accelerator on the demand for transparency and insights.
Fund managers who continue to leverage Excel for such a critical part of their business and restrict themselves to speaking only in top-line figures are at risk of losing investor confidence, missing critical issues and opportunities in their portfolio, and being outmaneuvered by peers.
Tomorrow’s private equity leaders aren’t relying on yesterday’s technology to get there
Paving Your Path Forward
As the industry evolves and data plays a bigger role in driving decision-making, your firm and your technology must also evolve with it.
Purpose-built software tools are an enabler to help you go where you want to.
There are recurring themes we hear as to why GPs are dropping their reliance on spreadsheets and adopting purpose-built tools. We are sharing them here and hope they can inspire and guide you as you embark on the path towards operational excellence:
1. Mitigating Risk
- Moving performance data management out of Excel means that its processing becomes more automated and the risk of manual errors is mitigated.
- Using purpose-built data visualization tools also surface less obvious risks by identifying trends in portfolios that may be red flags.
- These visualization tools also enhance your ability to address your LPs’ questions and requirements and mitigate the risk of underwhelming analytics impacting future fundraising efforts.
2. Moving from Analysis to Insights
- The benefits of applying new tech to your portfolio analysis are not limited to LP-related initiatives and can provide valuable insights you and the leadership team need.
- Rather than focusing time and effort building models and checking formulas, GPs can focus time on gaining insights and boosting confidence in the integrity of their outputs.
- With pre-built analytics, you can also scale your capabilities to employ more sophisticated analysis that drives your own firm’s decision-making on fund strategies, succession and much more.
3. Hidden Cost Reduction
- Many GPs consider “buy versus build” when it comes to solving their problems with technology.
- Building in-house or implementing bespoke software requires ongoing maintenance and restricts ease of integration with other external platforms.
- Not only is SaaS technologically implementation free, but is constantly developed on the back of user feedback to give all users benefit from the wisdom of the crowd.