To Outsource Or Not To Outsource: Fund Administration Special

“To outsource or not to outsource,” was the lead question from PEI’s editor, Graeme Kerr, for their Fund Administration Special 2017. And with further consideration, the question isn’t whether to outsource, but rather to what extent? CFOs and COOs are under increasing pressures for regulatory requirements and LP transparency that are pushing their back offices to the max. As a result, new strategic goals are being set with a spotlight on technology to help solve the expanding number of services needed to fulfill these demands as well as the volume and complexity of data needed to drive these services. To tackle this market problem, the Fund Administration Special brought together five technology experts to answer the big questions facing Private Equity firms. Altvia’s CEO, Kevin Kelly, is among the technology consultants featured in Ask the Experts, and shares these insights:

How can I manage our data better so I spend less time in the swivel chair switching between disparate systems?


Capturing data from multiple sources into a central system is one of the primary challenges for private equity firms. At the time of investment, LPs are seeking visibility into revenue multiples and other indicators that support the fund manager’s investment thesis. They are increasingly aware of the impact of multiples paid on expected returns and want the data to further inform this thinking and to be able to benchmark managers. For portfolio companies, LPs want to understand the numbers that the manager is using for the value of a company at any given time since that rolls into the net asset value of the fund. This is the puzzle yet the pieces are strewed about in several disconnected systems, causing massive amounts of ‘swivel chair’ work to pull the puzzle together from different systems to gain insights from the data. There are countless examples of disconnected data ranging from investor transparency to ESG. Data management is the key. A central system that can capture, consolidate, and integrate data from these disparate systems is the cornerstone. As the data gets connected, private equity firms can have the full spectrum of data points to build the models, benchmarks and ultimately transform data into insights for better decision-making.


We are being asked for ever more complex sets of data. How should we be looking to improve our data management?

Fund managers are looking to the value creation that more structured data management offers to address the ever-increasing complexity of data needed to fulfill regulatory requirements and investor demands, and to provide the intel to compete for capital and deals. There’s usually a twofold process: establishing best practice workflows and then identifying the right tools to support and drive these practices. Once a baseline for the business has been established, you can align the data management system to those processes. While there are a number of systems available, it’s important to consider the level of customization, integration and scalability you need over the longer term so that the system can evolve as your business grows. Moving to a more structured data management system comes at a price, but the opportunity cost of failing to recognize and invest in the software is significantly higher than the cost of implementation. Those private equity firms that invest in the right data architecture will gain a major informational and competitive advantage.

As back offices feel the strain of increased regulatory and LP scrutiny, it leaves no doubt of the complexities faced in the world of fund administration. The private equity industry is adapting to a new call to action to help solve this growing pain and what’s clear is that innovative solutions are required. And for these solutions, technology is by far the fastest-growing area to answer the call, which is why technology consultants like Altvia play such a critical role in a modern Private Equity firm.  

A traditional crm was built for general ‘customer’ scenarios

Software platforms have made the world a better place by making work a better place. Indeed the world is better off when people enjoy their jobs even marginally more, and workplace applications on big CRM platforms like have done that and much more.

But the potential that platforms like these offer presents diminishing returns: once the platform provider has engineered too many industry specific components into its platform, its usefulness for other industries begins to be threatened, and with that so do the usefulness of the component tools built into the platform.

So it is with the CRM category that has defined: it is generic enough to work for many industries, and yet still offers the potential for others to round off the edges and nail more vertically-oriented and extremely tailored software solutions.

Private capital markets are actually a great demonstration of this dynamic. Where generic CRM platforms simplify — appropriately so — to assume there’s a business, a customer, a sale, and service of that customer, there are a few industry-specific pieces that are missing.

Take for example, that investors become customers by investing through legal entities the GP raises. It’s a subtle but important nuance that just doesn’t make sense at a platform-as-a-service level (because it’s overly complicated for a simple one-time sale that many industries require), but which can easily be added without 10 years or software engineering. Once provided, the rest of the platform’s components become tremendously powerful again and you’re set to take over the world.

As a traditional CRM in our pillars methodology, these nuances must be present to properly account for investors in these legal entities, potential target companies and which are owned by these entities, the context of all interactions with these parties (as well as the appropriate overlap, ie co-investments), and how you’re arriving at finding these opportunities on both sides of the equation, such that you’re able to piece together what’s effective and what’s not. Not just because we say so, but because these are the very relationships and data that are key to the motivation behind a CRM in any industry.

It’s critical, too, that the valuable publicly-available information that helps to enrich CRM systems and save users painful steps of entering it themselves is fully-integrated at the platform level.

Again, look no further than the 3,000+ pre-built integrations that — the creator of the CRM platform concept — has at a platform level to do so, and which only exists by way of holding just short of overly-specifying certain industry workflows that would present challenges to properly integrate.

Stakeholder reporting and communication (investor relations) draws on a range of datasets

The traditional “customer service” model of CRM systems once again makes overly-simplified assumptions about the customer relationship when applied to private capital markets.

In fifteen years I personally have yet to hear the terms “warranty” or “service call” in this market because it’s just not the same. But make no mistake, as uncomfortable as it may be to say aloud, customer service is more important now than ever and it’s constantly happening; the industry is, after all, considered to be a financial “service”.

As it turns out, that service is primarily information-based — it’s driven by data and takes the form of reports and analysis that drive decisions, and then end up again in investor-facing reports and analysis.

The foundational elements of a private capital markets CRM must be built such that they accommodate this data (like we discussed above), but so too that it can accommodate additional supporting data that investors (customers!) need in the context of service.

Oftentimes this supporting data — financial metrics and time-based values, for example — is believed not to meet the traditional definition of CRM and the natural thought is “well, better do this in Excel!”.

While I happen to believe Excel is still the greatest software application ever built, its introduction to this value chain we’ve discussed herein actually creates the problem many firms suffer from: key data needed to provide customer service (again: effectively the entirety of a firm’s reports and analysis) is now in disparate systems and detached.

Both of those dynamics are important and distinct: not only is this supplemental data disparate, but when brought together there is no logical association that can be made between the two data sets.

Allow me, then, to make the point very simply: not only can this financial and time-based value data (you may be thinking about is as “portfolio monitoring” or “accounting”) be a part of a CRM, it is arguably the most important part of a CRM because it’s at the core of what providing service to the customer entails — information that comes out of data!

Firms need a digital method to engage stakeholders (ie investor portals)

Investor portals are not new; in fact, for many of us — including myself — they conjure up horrifying nightmares in which we’re aimlessly guessing at folders to find the newest document we need.

So in lies the opportunity: not only have the portals we’ve come to hate not simplified the process of acquiring information, they’ve failed to create an entirely new experience that is “customer service” driven.

To be fair, this is not a B2C market where you’d be long out of business for not having focused on customer service and thus the customer’s technology-driven experience. But don’t expect to be around too much longer if you aren’t thinking about this shift.

Today’s institutional investors increasingly expect this same consumer-like experience, and a massive opportunity is being missed by not providing it. It’s not about providing them the experience they desire; it’s more about the ability to measure engagement that is had in return.

Put simply: what’s keeping the market from providing this experience is the availability of the information that’s required to create the service that provides the experience.

If you’ve hung in this long, you know that by focusing on your CRM, you have the data that’s required to manage the customer relationship and the technology-driven experience through which that information is shared to create a differentiated and opportunistic customer experience.

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