Three Reasons Why General Partners Need to Embrace Technology and Standardization Right Now8 November 2021
Insights on technology, ESG and due diligence from our latest fireside chat with ILPA.
Limited partners’ (LP) requirements have shifted in recent years. LPs today want more specific and easily digestible data and communication from their fund managers so that they can make better-informed investment decisions.
New initiatives from the Institutional Limited Partners Association (ILPA) are providing solutions for better standards in the alternative investment industry, including easier ways to assess environmental, social and governance (ESG) data to reduce risk. Additionally, recent advances in investor-relations platforms are paving the way for more efficient LP-GP communication. Despite these initiatives, however, change and adoption of standards remain slow.
These topics and more are addressed in a recent discussion I had with Neal Prunier, director, standards and best practices at ILPA. Here are three key takeaways from our conversation:
There have been major technology upgrades on the GP side. New investor portals offer stronger cybersecurity protocols and more efficient LP access to information across funds. These advances include giving fund managers the ability to provide data beyond static PDFs so that LPs can manipulate and analyze information more easily in Excel.
But there’s still more work to be done. LPs are increasingly pushing for more data and transparency from their GPs, including portfolio-level insights, as well as underlying data that enables them to drill down into specific asset classes. The industry can continue to solve this request as more fund managers embrace technology and reporting standards.
ESG and DE&I
LPs are increasingly assessing ESG risks when making investment decisions across their entire portfolio. To help with this analysis, ILPA recently released the ESG Assessment Framework designed to help LPs evaluate and benchmark GP responses across a range of ESG considerations, inform goal-setting conversations with GPs and measure ESG progress over time. This tool will provide key information during the due diligence process and ongoing throughout the life of the fund.
ILPA expects to release a diversity, equity and inclusion (DE&I) metrics template in November 2021.
Fund Due Diligence
The industry is still grappling with a proliferation of lengthy, customized due diligence questionnaires (DDQ) from LPs, advisors and placement agents. This places a huge administrative burden on both the fund manager and investor. ILPA’s latest release of the standardized DDQ was compiled to make this process more efficient by compiling common questions and removing redundancies. Adoption isn’t mandatory, but the goal is to work toward industry-wide adoption. Many GPs plan on having the updated version available in their data rooms for LPs as their default DDQ.
It will be interesting to see how the private market moves over the next few years as stakeholders begin to implement ILPA’s new initiatives. Will these changes encourage better communication, more transparency and more useful ESG data? Will it reduce the workload for fund managers and LPs? In a highly competitive marketplace with historic levels of dry powder, GPs who embrace technology and standardization will have a competitive advantage when it comes to winning deals and the trust of investors.
Click here to watch Meghan's fireside chat with ILPA's Neal Prunier.
As Sr. Director of Strategy and Product Marketing for Intralinks, Meghan McAlpine is responsible for the go-to-market strategy and driving the growth of the company’s Alternative Investments solution, the leading communication platform for private equity and hedge fund managers and investors.
Prior to joining Intralinks, Meghan worked in the Private Fund Group at Credit Suisse. While at Credit Suisse, she raised capital from institutional and high net worth investors for domestic and international private equity firms.
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