News

Investor communications: private equity’s information gap

October 31, 2017

Enthusiasm for private equity as an asset class continues to rise in a time of opportunity for fund managers – Preqin data shows the number of private equity funds in the market continued to grow in Q3 2017, with a 10 percent rise in the number of funds raising capital since the start of the year. And this enthusiasm can be easily explained. The macroeconomic environment continues to be characterised by volatility and a paucity of yield when it comes to more traditional asset classes. Not only does private equity allow institutional investors to invest in ‘real’ assets that they can see and understand, it also clearly delivers better returns than other asset classes over the long term. It offers pension funds an attractive alternative at a time when they are under pressure to generate increased returns for members.

The transparency problem

However, the good news comes alongside a growing challenge for the industry in terms of how fund managers (GPs) communicate with their investors (LPs). LPs’ lives are becoming more complex for a host of reasons as they face increased demands from their own investors and members, as well as – of course – regulators. Post-2008 we live in an era where transparency is the watchword: everyone wants more data, more granular information, and to know precisely what’s going on.

Alongside this, regulatory transparency has exposed issues relating to fees and expenses charged by PE funds, with the old ‘2 and 20’ model coming under increasing attack, putting investors “on notice” when it comes to securing value for their allocations. This means GPs have to go the extra mile in order to demonstrate bang for buck and secure big ticket investments.

Ultimately, the pressure to better manage their asset allocations leaves LPs needing a deeper understanding of valuations, and the reasoning behind the multiples of each investment. Traditional reporting wherein GPs send quarterly updates on the value of LPs’ investments is no longer enough. Investors need far more granular detail on the workings of the fund, which companies are faring well and which aren’t – not just one simple figure.

As investors become increasingly demanding in terms of their information needs, Augentius’ recent private equity survey reveals that to a large extent the needs of LPs are being met – almost half (47 per cent) of investors generally felt their managers are providing all the needed information.

However, more work is needed. Almost one-fifth of fund managers are still not providing their investors with the information they require. In total, 47 per cent of global managers were considered “up to speed” with investor demands, which means LPs did not need to make special information requests. And just over one-third provide more information, after being asked.

This means additional work is still being created for LPs, and what is surprising and somewhat concerning is that nearly one in five investors ask for additional information but never receive it.

The survey also showed there is a regional divide on how managers intend to bridge this information gap. American and European managers are eyeing technology as a solution, while the results show their Asian peers plan to increase resources to address the issue.

Change isn’t easy

So not only are GPs moving towards providing more information, but LPs are having to develop their own operating models to absorb and effectively use the data. But this is never easy.

A key issue here is formatting. On the one hand, GPs often present data in emails or PDF documents which provide little value to data-hungry LPs. On the other, some LPs circulate their own files for completion by the GP, which allow for automated mapping into LP systems, but there is little consistency, and GPs are reluctant to go down this route given the time and effort involved to complete.

And with the globe’s digital revolution continuing at speed, cybersecurity and the question of whether investor communications are secure is becoming an ever-increasing concern to both the industry and regulators alike. With the advent of advanced and secure investor portals, some managers have begun to transition away from this relatively unsecure approach of using emails and PDFs. However, as Augentius’ private equity industry survey revealed, this transition is still very much underway.

The results highlighted the need for more GPs to move towards more secure communication methods. Only 35 per cent of investors currently receive information via investor portals, but 42 per cent would prefer this format. This suggests investors are increasingly aware of the risks involved in older methods and are starting to expect more.

Again, there were regional differences in communications trends, with more fund managers in the Americas already reporting via a portal. Just under half, 43 per cent, do so compared with 36 per cent in Europe and 22 per cent in Asia.

Fund managers, who aren’t already, should consider using more secure portals, especially when communicating on issues such as drawdown payments. The rise of cybercrime means the world is becoming a more dangerous place every day – so it is imperative that everyone has the right protections in place, either in their own systems or via third parties.

So what’s the way forward?

Given the various restraints on costs and resources, GPs are continuing to look to third party providers to provide both the technology and resources to meet the ever-increasing communication demands of their LPs.

Plugged in as they are to a wealth of client and portfolio data, coupled with a preoccupation with detail, fund administrators are well-placed and have the right mentality to collect the data required, and provide the detailed analysis required by LPs. Output can be provided to the depth and frequency demanded – and delivered in a secure and efficient manner.

If the past year has taught us anything, it’s that market change can be unexpected and abrupt. A lot will depend on how newly emergent political and macroeconomic tensions end up playing out – the final details of the Brexit settlement, in particular, could end up redrawing the European regulatory map. But by embracing new technology and communication methods, private equity firms can improve investor relationships, putting themselves on good footing to weather any storms ahead, and gain that crucial edge in an increasingly competitive and unpredictable environment.

Article originally published in Opalesque


Augentius builds on growth with new European hire

October 11, 2017

Private Equity and Real Estate veteran Erin Sarret appointed to spearhead European expansion

Augentius, the specialist global service provider to private equity and real estate funds, has appointed industry veteran Erin Sarret as its new European Business Development Director. The move follows another successive year of 20 percent growth for the firm and marks its intention to build on this expansion in a region blessed by record fundraising and beset by unique regulatory challenges.

Sarret, who will lead the growth initiative, is a well-known figure within the Private Equity and Real Estate industries, and will bring nearly two decade’s worth of top-tier experience to the role. Having originally qualified as a lawyer and been admitted to the Californian Bar in 1994, Sarret entered the Private Equity industry in 2001 in Paris, working for Deloitte in M&A and then as General Counsel for placement agent Triago. Since then she has enjoyed an impressive career in investor relations joining Access Capital Partners in Paris as Director of Marketing in 2006, with subsequent roles at Wilshire Private Markets Group in Amsterdam, Morgan Stanley Alternative Investment Partners in London, AXA Investment Managers, LFPI and most recently in the public markets as Investor Relations at Air Liquide.

Erin Sarret, Business Development Director, Augentius commented: “I have watched Augentius grow from a tiny business into a global market leader with a reputation for delivering the highest quality of service to its clients. I am absolutely delighted to be joining such a progressive group that is always looking to innovate and change in response to the needs of a rapidly evolving industry.”

J.P. Harrop, Group Head of Sales, Augentius, added: “We are absolutely delighted that Erin is joining us. Her industry knowledge, long-standing connections, and acute awareness of the needs of clients all make her the perfect choice to spearhead our ambitious European growth plans. The European market is currently at an exciting juncture, with a buoyant fundraising market offset by unique and thorny regulatory challenges and uncertainty. There is no doubt that Erin will be a fantastic asset to our business as we continue to help clients navigate the changing times.”

 

 

 

 

 

Erin Sarret
Business Development Director, EMEA

Press release originally published in Private Equity Wire


CYBERSECURITY WEBINAR

September 28, 2017

Cybercrime is growing across the Private Equity and Real Estate sector. Cybercriminals are more sophisticated than ever in their evolving attack methods, as we have seen from the recent WannaCry and NotPetya attacks. Regulators including the FCA and SEC are now starting to put a spotlight on requirements for preventative measures.

In our latest webinar, eSentire’s Founder and Chief Security Strategist, Eldon Sprickerhoff, and David Bailey, Group Head of Marketing at Augentius, discuss how the current threat landscape might affect Private Equity and Real Estate fund managers, and the essential best practices to minimise your firm’s vulnerabilities. View the webinar slides and recording below:

Augentius/eSentire cybersecurity webinar slides
Augentius/eSentire cybersecurity webinar recording