Wed, 15/07/2015 - 13:05
To help overcome the increased reporting burden faced by private equity managers, SEI has developed an automated end-client reporting capability. It comes at a time when global PE firms are having to adapt to regulation in the form of AIFMD and Annex IV reporting, not to mention a desire by LPs to derive greater transparency from their PE allocations.
Indeed, LPs are themselves coming under increased regulation – for example, insurance companies who need look-through reporting capabilities to manage their Solvency Capital Ratios under Solvency II.
This is putting pressure on back-office teams to generate reports in a more timely fashion. That is no easy task for PE firms, many of whom still rely on manual processes such as Excel spreadsheets and Powerpoint to create investor correspondence. It is a time-intensive, laborious process and diminishes the ability for IR teams to work on other critical tasks to help build the business.
“As part of the implementation process with each client we understand their current reporting process and format and then agree on what type of reporting template they want to utilise going forward; it could be branded, graphical, it could be more calculation-focused,” says Joseph Henkel (pictured), part of the Global Solutions team at SEI’s Investment Manager Services division in Dublin. “There really isn’t a limit to what the end-client reporting capabilities are. We see this as an important industry differentiator today. It’s not only more transparent, it’s also more reliable and quicker.”
Of course, when it comes to reporting, every GP is different. To be able to generate custom templates SEI has built a publishing agent. According to Henkel, it is in the interests of both the GP and SEI to develop the template before the fund has its first close. “Not only are we doing this on a quarterly basis for their capital account statements, we are also doing it for their capital calls and distribution notices,” notes Henkel.
Once the data is available, it can then be easily fed into the template for the GP to review before SEI submits the report to their end investors.
According to Henkel, by using bespoke templates for each client, “once we have all the data we can create end-client reports in a couple of hours that would ordinarily take other administrators and PE managers five days or more to produce. Some administrators are still reliant upon Microsoft products for end-client reporting, which means they aren’t as flexible.”
That ability to migrate away from manual reporting to automated reporting has the potential for PE managers to steal an edge on their peers. Prospective investors – many of who now consider operational excellence as a key criteria as well as a manager’s track record – will choose a manager with enhanced reporting capabilities over one who takes days to respond.
Anything that can cut down on the time and complexity of reporting once the valuation process has been concluded has to be a positive. Reality is, we live in a world of instant data. People have never been so interconnected. Alternative fund management is no different, and whilst hedge funds have been quicker to adapt to the benefits of near real-time reporting, PE managers remain behind the curve.
Another advantage to using an end-client reporting solution such as SEI’s is that it enables PE managers to reduce their operational risk. By building links to the data it ingests, either from GPs or third party data providers, SEI is able to release the pressure valve as PE managers become more proactive in their reporting. Currently, SEI is ingesting data from Burgiss, who provide transparency information for underlying PE FoF investments.
“As well as offering this end-client reporting service as a value-add to our existing PE clients, we have also started offering it as a standalone service managers who do not currently use as their fund administrator. We see ourselves evolving from being a pure fund administration player to more of a data warehouse technology provider,” confirms Henkel.
To be clear, SEI is still on the cusp of providing these standalone (or technology) services. As well as providing bespoke end-client reporting it will also be able to support managers as they look for solutions to regulatory reporting. “Regardless of whether the manager has one administrator or five administrators, we can pipe the data in to our data warehouse to provide Form PF, Annex IV, CPO-PQR reporting and so on,” says Henkel.
That ability to ingest data from a variety of sources is illustrative of just how far fund administration has moved in the last few years. The data warehousing that Henkel refers to is a response to Big Data; to not only help managers by collecting, verifying, and cleaning fund data but to actually do something meaningful with it.
SEI started developing its data warehouse back in the early 2000s as a response to a particular client demand. Over the last decade the firms has invested resource and investment dollars in building proprietary tools needed to ensure data can be ingested, aggregated and managed with the integrity required to enable institutional managers and investors to rely on its accuracy and quality.
“As more regulation gets introduced and investment and internal management demands increase we feel having a data warehouse in place is going to be crucial for PE firms to continue to evolve,” says Henkel. “As PE firms evolve into diversified asset managers, we’ll be able to provide them with much more insight on data across their entire product range.
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