Is portfolio monitoring still a pain point for your private equity firm? After nearly two years of remote work, the savviest private equity firms across the globe are emerging from their home offices more efficient and operationally advantaged than ever before, thanks in large part to technology adoption. According to a piece by Acuity at this time last year, “although firms are investing heavily in digital transformation, but an increase in investor demand, lack of internal bandwidth and limited options in terms of managed solution providers are delaying technology initiatives. Going forward, PE firms will invest more time and fund in technology applications, process enhancement and automation.”
Whether your firm has a portfolio monitoring best practice framework that is practised using its software provider of choice, or not, it’s important that the firm adhere to certain principles in order to compete in today’s fast-paced environment. Some best practices are fundamental requirements that are indispensable to a firm, while other best practices are more forward-looking and strategic.
Below, we outline the eight key portfolio monitoring best practices your private equity firm should begin (or continue) in 2022 and beyond if it hasn’t done so already. Doing so will enable the portfolio monitoring function to be future-proofed. It will also empower general partners (GPs) to respond to new requirements emerging in the private equity industry and take advantage of the vast data that is created in their portfolio of investments.
- Acquire robust data, and do so flexibly: firms should be able to get data into, and out of, their portfolio monitoring platform quickly and easily.
- Easily validate and control data received: the ability to perform data audits cannot be underappreciated by private equity firms when it comes to portfolio monitoring.
- Encourage business intelligence: No matter what, private equity firms need to be able to produce valuable and proprietary insights. This can only be reality when professionals are encouraged to represent their work and intelligence into the collective knowledge bank.
- Make arduous, manual processes a thing of the past: Efficient processes for all tasks, such as reports for key stakeholders, is now possible with minimal manual intervention, thanks to technology. For once and for all, stop the madness of unnecessary administrative burden that’s causing top talent to burn out.
- Unleash the data: When a firm deploys technology that enables to data model to be flexible, they can perform quick data interrogation and analysis. Those that do not will have their competition running circles around them.
- Align your reporting and data to what really matters: Great value creation models combined with purpose-built portfolio monitoring technologies enable firms to correlate their strategic plan to targets and actual results.
- Make ESG a bigger part of the picture: There’s no stopping the ESG train, so it’s time your firm get serious about ESG data. When it’s integrated into the firm’s value creation strategy for a given portfolio company, private equity can go beyond greenwashing and achieve a true representation of the efforts that improve ESG performance.
- Embrace the technology on the frontier in the industry: Firms are amassing data at a previously unthinkable rate. But what will they do with that data? Leading private equity investors are looking to AI-enabled analytics for advanced insight, and that means your firm should consider it, too.
If you would like to learn more about how to take your private equity portfolio monitoring to the next level and get some power behind your portfolio, check out our brochure for more information.