As the markets face increasing volatility and headwinds, private market investors are increasingly reviewing their operating models and looking for efficiencies. Many are turning to private equity digital transformation to drive impact.
While getting started with private equity digital transformation can seem daunting, private equity digital transformation isn’t an all-at-once process. It’s a step change over time that can yield exponential results. Some investors are at the beginning of their journey. Some have taken baby steps, and others just need one final push to achieve total transformation into a digital operating model.
Whether you are seeking a full-scale playbook for your private equity digital transformation or just looking for a few hints to take your next step, CEPRES can help lay out the roadmap for winning in the age of disruption.
With more than 4,000 LPs, GPs, fund of funds and more leveraging CEPRES to accelerate their private equity digital transformation and power better private market investments, we have identified key places to start on your private equity digital transformation journey.
Review your private market data sources and how this data is part of investment decisions
Do you have verified, accurate, actionable cash flow data directly from GPs, or are you relying on generic PDF reports from third-party providers that simply scrape the public domain? Does your private market data provider verify this data with the asset owner or just package up reports?
Does the right data flow into predictive models that generate alpha while minimizing risk, or is this data just output to have an audit trail? Are you using look-through data to truly understand your investment decisions? How do you imbue data-driven decisions at every point of the investment lifecycle?
Consolidate investment data into a single source of truth
Audit your existing data streams and sources. Do you spend your time formatting data or analyzing data? Where can you redeploy time into higher-value initiatives? Are you presenting the right information to the right stakeholders at the right stages of the investment life cycle? How can front office investors access this information on demand and in real time? Do you have an Excel guru who is a key person risk or does your entire investment team leverage the same tech stack and playbook?
Review your technology stack
Does your analysis involve building increasingly complex macros in Excel? Are you using OCR to pull PDFs into your analysis system? Do you have key person risk in your analysis? Is your investment technology built for investors? Is there intentionality behind every system and connection point? Are your front office tools repurposed back- and mid-office solutions, or are they purpose-built for front office investors?
Take a new approach to benchmarking
Widening the investment aperture is necessary to get the best returns. Are you using the best tools and technologies to get a competitive advantage and unlock better investment outcomes? Where is your white space? Do you know how you’re performing relative to your peers? Can you compare portfolio company performance of GPs to understand who is making the best investments for your investment thesis? Or are you relying on a brand name to influence your decision?
Look for a digital center of excellence across the investment team
What do these high performers do differently that can be systematized and embedded into core front office initiatives? What can be borrowed from back- and middle-office to create front-office efficiencies? How are you measuring that impact? How can you upskill the rest of the team?
Determine what truly needs to be insourced
Most deal teams have a limited headcount, yet an unsustainable amount of their time goes into processes that can be automated, outsourced and run in the background, including analytics, data hygiene and more. Are your people focusing on the right areas that drive better investment outcomes or can they be deployed more strategically?
Audit your portfolio monitoring tools and processes
Are you looking at your portfolio in totality on a single platform or simply looking at individual investments in isolation? Do you just rely on quarterly reports to gauge impact? Can you instantly understand portfolio sensitivity, correlations of value, return drivers and more? Review the purpose of your portfolio management and portfolio monitoring setup to determine opportunities.
Evaluate your entire deal-making and investment playbook
Are there legacy processes and tools that are in place simply due to inertia? What can be digitized and automated vs. what requires your human capital involvement? Are there key person risks baked into your investment decisions, e.g. an Excel guru who has an outsized impact on analysis?
Apply the same value creation lens to your portfolio as an operating team does to its portfolio companies
Where are efficiencies and where can technology accelerate impact? Are the right people, tools and processes in place? How are you measuring that impact? Would another investor invest in you or are you falling behind?