Wed, 27/01/2010 - 05:59
A large portion of alternative investment firms may be hindering their capital raising efforts by not providing investors with access to online reporting systems, according to a survey by Netage Solutions.
The survey also revealed that limited partners and their advisers overwhelmingly agree that such systems increase transparency.
The survey of 31 institutional investors, family offices and advisers conducted in the fourth quarter of 2009 found that nearly 87 per cent of respondents either agreed or strongly agreed with the statement, “online reporting systems provide much needed transparency in the alternative assets industry”.
Further underscoring the importance of investor portals in the wake of the Madoff scandal and the financial crisis, 63 per cent of respondents said that they “prefer to invest with alternative asset managers that report online to investors.”
Despite validating the intrinsic value of online reporting systems, the survey reveals that a significant portion of alternative investment firms do not currently provide their investors with a secure portal for viewing and downloading reports, documents, and other information.
Nearly 42 per cent of respondents said that only 26 to 50 per cent of their fund managers provide access to a portal, while another 16 per cent of respondents reported that less than a quarter of their managers do.
“The conclusions that can be drawn from this survey are eye-opening,” says Stuart Sheppard, managing director at Netage Solutions. “That a majority of respondents prefer to invest with alternative asset managers who report online indicates that firms without investor portals are potentially missing out on opportunities to raise capital from new clients. On the operational side, these firms are definitely not realising the significant time and cost savings typically generated by online reporting systems.”
The survey also found that even those firms that do offer investor portals have some work to do. Overall, respondents ranked online reporting systems between “fair” and “good” with a rating of 2.61 (on a scale of one to four).
Although the quality of investor portals offered by each alternative asset class varied somewhat, the scores still fell within the same range. Private equity topped the list with an average rating of 2.74, followed by venture capital (2.57), hedge funds (2.56), funds of funds (2.32), and real estate (2.21).
When asked what improvements investors would like to see in online reporting systems, most comments centred on their navigation and search capabilities—enabling users to find information quickly, and with fewer clicks.
Another popular suggestion was the ability to download data (e.g. transactions and capital account balances) to Microsoft Excel, so these figures do not have to be manually re-keyed.
Several investors recommended back-filling new online reporting systems with historical fund information, including capital calls, distributions and unfunded commitments.
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