Better Reporting in Private Equity Will Attract and Create Loyal Investors
Coller Capital, Global Private Equity Barometer has found that 31 percent of European investors are decreasing the number of private equity firms they use as opposed to nine percent in 2006. Also, investors are no longer automatically reinvesting with their existing private equity firms when they bring a new fund to market.
30 April 2010
According to the French Private Equity Association (AFIC), €10 billion has been invested in the French private equity market over the last ten years. It's, therefore, unsurprising that private equity represents one of the main growth drivers for the French economy. As a result, it was with great interest that I recently attended AFIC's 13th Annual Private Equity Conference in Paris. Over 900 people were present at the event and it provided an excellent opportunity for institutional investors to meet with the French private equity community to discuss general market trends, explore how to promote the economic and social benefits of private equity and how to improve the financing of the economy.
I attended all of the sessions and many were led by a number of high profile and influential individuals including Ramon Fernandez, managing director of the treasury and economic policy, and Jean-Louis de Bernardy-Sigoyer, chairman of AFIC. However, one particular presentation that stood out for me was a session called Limited Partner (LP) Introspection which started with an introduction from Daniel Dupont, a partner at Coller Capital, a leading global investor in private equity secondaries.
What I found most interesting about Daniel’s presentation was his discussion exploring how European investors have changed their approach to portfolio management. The Coller Capital, Global Private Equity Barometer has found that 31 percent of European investors are decreasing the number of private equity firms they use as opposed to nine percent in 2006. Also, investors are no longer automatically reinvesting with their existing private equity firms when they bring a new fund to market. Only 16 percent are reinvesting with their current private equity firms as opposed to 55 percent in 2005. The question for private equity firms in this case is how do we stay on the good side of the investors so they continue do business with us and reinvest in our new funds?
The answer to this could be to improve their reporting. The Coller Capital, Global Private Equity Barometer has found that 48 percent of investors want better reporting from the private equity funds they invest in but what exactly does better reporting mean? In my view, for starters, it has to be conducted online. Investors, particularly institutional investors, already work online and therefore want to be able to access their reports anytime from anywhere.
Are European funds doing what their investors want when it comes to reporting? Anecdotal evidence suggests no. I spoke to an institutional investor at a large pension fund in Belgium who clearly wasn’t technology obsessed. However, when it came to reporting, he emphatically stated that he wanted his reports online. Furthermore, he explained that when he receives reports in hard copy the first thing he does is scan them into soft copy files – clearly a disruption from his normal daily workflow. Is the European private equity community listening to its customers? Again, the answer would seem to be no. Our friend in Belgium reports that considerably more than half of the funds he invests with send him hard copy reports that require him to stop his market analysis and go to the scanner. I wonder if he’ll be thinking about this when he’s deciding which funds to keep and which ones to cut loose...
Intralinks' stand at the French Private Equity Association’s (AFIC) 13th Annual Private Equity Conference