According to a recent study by SEI News, after several years of underwhelming performance and lack of liquidity, many private equity fund administration teams are trying to increase transparency to attract and retain skeptical investors.
After all, confidence is—as it should be—a critical element when it comes to making a commitment.
A great way to provide the transparency that stakeholders crave, both in fundraising and investing, is to implement a purpose-built and intuitive fund management software platform.
Not only does this type of system simplify private equity fund administration for the primary users, it makes it fast and efficient to provide information and insight to anyone outside the firm who needs it.
What Is “Transparency” in Private Equity?
From a fundraising perspective, transparency starts by knowing where you are in the process. You have to have an accurate understanding of your progress in order to communicate information clearly and concisely to investors.
For example, if you have a first close and are planning on a second close at a specific future date, having clarity on where you are in your overall fundraising process at any given time enables a GP or manager to be transparent regarding their fundraising activities.
The right private equity fund administration system can also provide important information should any issues arise with the fundraise. Specifically, a system that helps track detailed data on your contacts could prove invaluable in a case involving alleged malfeasance by consultants or other intermediaries.
Documenting the connections between your fundraising prospects and your fundraising activities can be critical to understanding and explaining your level of involvement. Without that type of easily accessed “audit trail,” you could find yourself having to do much more work to outline what has happened.
A private equity fund administration system can be useful on the investing side, as well. In particular, the fact that it provides a central database of all the contacts at each of your investors is very helpful.
Ensuring that everyone is using the same contract records and has easy access to them is critical.
Tools To Assist With Transparency and Private Equity Fund Administration
Another critical facet of transparency is understanding who is expecting to hear from you and how often they want to receive communications from you.
There is such a thing as providing too much information to busy stakeholders, who may feel compelled to look at everything you send so as not to miss something particularly important.
Consequently, it is important to have a way to track interaction preferences.
Our data management platform has features that enable users to record these types of characteristics.
Pair it with a means of streamlining and tracking communications with investors, such as our ShareSecure LP Portal, and you have the capabilities you need to quickly and easily share information with all relevant parties—and only relevant parties.
If you’re putting together monthly or quarterly updates, a virtual data room and GP-LP engagement platform like ShareSecure empowers your team to share those documents in a secure fashion. And as you do, you also have visibility into how often your investors are accessing the information.
Private Equity Fund Administration Requires Effective Data Management
Full transparency in private equity fund administration requires tracking the data you want to share, and that requires having a defined process in place for collecting information—financial or otherwise—on the performance of portfolio companies. If you don’t have that data, you can’t produce the content that you would turn around and share with your LPs.
And, of course, if that information isn’t well organized and accessible, you may as well not have it at all. A private equity fund administration solution enables you to turn disparate information into valuable data and actionable insights.
