An ongoing survey conducted jointly by Intertrust Group and Global Custodian has shown that chief financial officers (CFOs) of private capital funds are gearing up to meet expected investor demands for enriched and more frequent data, both about their investments per se and the way the funds in which they have a meaningful stake are getting to grips with their demands for information.
Responses so far have come from private capital fund CFOs or their immediate reports in USA (39%), UK (29%) and China (25%). Assets under management of respondents ranged from less than $1 billion (38%) to more than $50 billion (7%). Funds covered private equity (37%), private debt (20%), infrastructure (24%) and real estate (16%).
The survey revealed that over the next decade, CFOs expect their LPs to require data updates with increasing frequency. In particular, just under 40% of respondents expect their investors to be looking for access to live updates on portfolio performance and 30% on cyber-security (See Fig. 1).
At the same time, 40% of participants are expecting a need for daily updates on operational SLAs and 35% on ESG – updates that private capital funds will not necessarily be in a position to provide without further investment in functionality and resources.
Increasing demands for regular updates will obviously require more input at some level from CFOs themselves. Fig. 2 reflects the CFOs’ collective views on which areas of client demand will have the greatest impact on their day-to-day responsibilities in the years ahead. It shows that portfolio performance, operations and cyber-security is where most expect their attention to be drawn, while ESG, and diversity and inclusion are expected to occupy less of the CFO’s own attention.
Asked to select up to three areas that they anticipate will have the biggest draw on available resources at the fund: portfolio performance and operations again top the tables (See Fig. 3).
With the competing challenges of addressing the expected client push for more frequent data updates and the endogenous requirements resulting from fund growth, CFOs are faced with several alternatives, including outsourcing, buying in more technology or beefing up the CFO team. The survey suggests that, as things stand, increased investment in technology and people or outsourcing more functions would be the most popular choices (See Fig. 4).
Of course, in the case of further investment in in-house expertise, the obvious next question is what areas CFOs consider the most urgent to commit additional funds to. In the next three years, survey respondents expect technology to be top of the list – confirmed anecdotally by the growing trend to include coding and software proficiency in advertised job requirements for new hires for financial positions (See Fig. 5).
The survey, launched in late Q4, is still running and the tentative analysis outlined herein may well be affected by encompassing more jurisdictions. As a new year begins, private capital fund CFOs also have more short-term considerations. As one survey participant notes, “Getting over the COVID crisis is the most important challenge right now.”
Further analysis will be released once the survey closes in mid-January. This will also include the results of a parallel survey of private capital investors to compare the expectations of CFOs with their clients. This will be followed by a webinar where the results will be discussed.
If you are a private capital fund CFO and would like to contribute to the survey and report, please click here to participate.
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