Challenges in the Private Capital Markets: Part Three

At the end of the second installment of our interview with Kevin Black, EVP of Ipreo Private Capital Markets (Ipreo PCM), he alluded to some growing pains the private markets are experiencing as their growth increases.

In today’s final installment, that’s where we start.

Ipreo Blog: Everyone agrees that the growth of the private capital markets is a good thing. But you mentioned that this growth brings challenges. What are those?

KB:  It’s all inter-related – kind of a chicken and egg situation.  Transparency is the key to the growth and health of the private markets, and in turn that growth increases the scale and complexity of the transparency that needs to be provided.  Ultimately, these challenges are logistical, which can only be solved with the smart application of technology, sound management of data, and consistent processes.  When I say “logistical”, I mean the practical obstacles for participants to actually provide the transparency required for real private market growth.

Blog: For example?

KB: We were talking to the CFO of a major private capital firm recently, and he commented that one of his top two – top two! – problems right now is the volume of data requests he gets from his LPs.  He had 25 different comprehensive LP questionnaires on his desk, all seeking info on their portfolios, all asking for similar data in a different way.

It’s not that he doesn’t want to provide this transparency and service to his LPs; he does.  His challenges are logistical.  Specifically, how can he get the data needed from multiple different internal systems together in one place, figure out all of the different formats and permutations of each data item requested by each LP, and complete those data requests accurately, compliantly and on-time?

Blog: Other examples?

KB: The other of the “top two” challenges of the CFO I mentioned above involved their valuation process.    Specifically, how can he be sure that they have the right data all together in one place and that they are using consistent, defensible assumptions and methodologies when they value their private investments?  E.g., do they have the cap tables of all their investments up-to-date?  Are the latest reported financials from each investment current and accurate?  Are the Excel-based valuation models flawless or is there a formula errors hidden in there somewhere?

The more investments a private capital firm has and the greater the scrutiny of those valuations by regulators and LPs, the bigger the scale of the challenge facing the private capital firm.

Blog: How do you solve these challenges?

KB: Again, the solutions to all of these challenges require great technology, sound data management and improved internal processes.  We bring all three of these to the table to help our clients.

There are different aspects to what we do; the core Ipreo PCM platform is really all about data transparency; we help a firm collect data from their investments, have it in a single source of truth, and then have super-flexible reporting to they can give anybody whatever they want.

We also have a valuation platform [Editor’s Note: we’ve written about it before], which is applying those same three elements – technology, data and process – to solve a different set of problems.

Blog: It’s not just one issue, and it’s not just one solution.

KB: I like to think of what we’re building as a cohesive and comprehensive “data ecosystem” for the private capital markets, along with the integrated workflow solutions and process best practices to enable our clients to create value from that data.

This includes multiple solutions, but all built on a common foundation of data, technology and process excellence.  That’s what we’re creating here at Ipreo PCM.

Related Blog Posts:
Challenges in the Private Capital Markets: Part One
Challenges in the Private Capital Markets: Part Two

Visit the Ipreo Private Capital Markets page for more information on Ipreo PCM and our iLEVEL and Qval products.