Who’s in your Top Ten? – LP demands push decile rankings
Deciles and quartiles have been around for a long time and have been used to rank everything from hereditary traits …
Doing things better and making jobs easier usually means finding ways to create order out of chaos. That’s probably what Mary Shelly, author of the classic nineteenth century gothic novel, Frankenstein, meant when she wrote, “Invention, it must be humbly admitted, does not consist in creating out of void, but out of chaos.” These days, many limited partners investing in alternative investments find themselves in in a state of increasing chaos despite all of the powerful and sophisticated technological solutions they use to manage their investments. The roots of this dilemma lie in a few essential tasks that have stubbornly resisted automation.
All the systems that LPs use, no matter how sophisticated, require large amounts of data to be fed into them. And that’s been their weakness because, until now, all that feeding had to be done by hand. Formerly, LPs had to gather data from each of their GPs individually, receiving hundreds of separate PDF documents every quarter to process and enter into their systems’ databases. These documents often had to be divided among several password-protected data rooms in a complex process that involved multiple teams, each with specialized financial knowledge. All the documents required reconciliation and were entered manually.
These steps really describe a cycle, one that has to be repeated every quarter for every fund in which LPs have invested. The cycle begins with collection, which is where the trouble begins, too. Every quarter LPs must collect financial and performance data from each and every one of their investees. Some GPs will accommodate their LPs and send requested data regularly and in a form tailored to their LPs’ individual needs. Others will be late or ignore requests for specific formats—or both. Those non-compliant GPs make the next part of the cycle necessary: transformation of the data. Once that part of the cycle is done, the next part, validation, is required to ensure accuracy. Only then can the cycle close with the delivery of reports.
Calling the process cumbersome is an understatement. What LPs have long needed is a system able to automatically collect the data across their portfolios, transform the data into usable formats, validate the data and deliver the required reports. Such a system will free LPs from slow and expensive data processing. Focusing more of their resources core tasks like performance and risk analysis will help LPs gain insight and optimize returns.
That’s why eFront has introduced its new cloud-based investor services, which outsources the entire quarterly reporting cycle while providing LPs with instant data access through customizable dashboards
After all, collecting and processing data isn’t their job; investing is.