Increasing Transparency for Private Equity Fund Managers
According to a recent study by SEI News, after several years of underwhelming performance and lack of liquidity, many private equity fund managers are trying to increase transparency to attract and retain skeptical investors.
One way we’ve seen clients increase transparency in both fundraising and investing is through the use of a well-organized fund management software system.
What is Fund transparency?
From a fundraising perspective, transparency starts by knowing where you are in the fundraising process and being able to communicate that to investors.
For example, if you have a first close and you’re 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 at least enables a GP or manager to be transparent regarding their fundraising activities.
Additionally, a system that helps track rich data on your contacts could prove invaluable in a case involving alleged malfeasance by consultants or other intermediaries. Simply tracking the connections between your fundraising prospects and your fundraising activities can be critical to understanding and explaining your level of involvement.
On the investing side, one way a fund management software system is beneficial by providing a central database of all the contacts at each of your investors.
Tools to help with Fund Transparency
Having data well organized and knowing who you need to communicate with and how often you’re communicating with them, is a critical facet of transparency.
Our CRM solution AIM, or any well-organized CRM system can give you the ability to keep track of this data. Additionally, any means of streamlining and tracking communications with investors, such as an LP Portal, can help you quickly and easily share information with relevant parties.
If you’re putting together monthly or quarterly updates, an LP Portal lets you share those documents in a secure fashion and have visibility into how often your investors are accessing the information.
Transparency is dependent simply on tracking the information that you want to share. So having a regular process in place to collect information–either financial or non-financial–in a well-structured way on the performance of portfolio companies is the first step.
If you don’t have that data, you can’t produce the content that you would eventually turn around and share with your LPs.