Mastering Private Equity Fund Reporting: Tools & Tips

July 12, 2023

Jonathan Charpentier

What is private equity fund reporting?

Like venture capital, hedge funds, and some real estate, private equity funds are an asset class many call an alternative investment. These investment funds operate as a limited partnership where a founding partner or general partner is responsible for fund allocation and management, and a limited partner provides investment funds.

Because of the increased complexity of owning portfolio companies and engaging in capital calls and endowments, investment advisers, portfolio managers, and investors need an effective reporting platform to make educated decisions in a timely manner. 

Enter private equity fund reporting, a crucial tool for the success of equity funds. Using a private equity reporting tool comes with many benefits, like improved efficiency, higher ROI, and the ability to scale as your investments become more complicated. 

In this article, we explore private equity fund reporting, why it’s essential, and what to look for when you decide to implement a solution. Plus, once you decide on a platform, take it for a test drive to make sure the software is a proper fit for your needs. 

The benefits of using private equity fund reporting tools

As an alternative investment, understanding how private equity is performing is vital in comprehending your financial position. When you invest in fund reporting tools, you can obtain greater insight and meet any changing reporting requirements before they impact your investments. Here are a few additional benefits of using such tools:

  • Efficiency through automation – Traditional reporting is time-consuming and expensive for general partners (GP), while limited partners (LP) must wait for details, sometimes days after the quarter ends. Create efficiency for all parties by deploying reporting tools with automation features that also reduce GPs' time and effort required. 
  • Improved data accuracy – Humans are prone to errors, but an automated reporting platform can improve the accuracy leading to more informed investment decisions. It can also help prevent any regulatory action due to accounting inaccuracies or discrepancies. 
  • Scalability – As fund managers take on additional investments, managing everything becomes more complex. A private equity fund reporting tool can help keep track of investment vehicle performance, valuations, and ROIs as the fund grows. 
  • Real-time monitoring – Traditional private equity financial reporting occurs several days after the quarter closes. Keep track of portfolio performance at any time with real-time monitoring. Real-time monitoring allows you to keep tabs on fund administration on your schedule. 

LPs are no longer at an informational disadvantage, as private equity fund reporting reduces overall investment risk thanks to new tools. Despite reporting tools being a tech stack investment in itself, the ROI is massive when considering the knowledge they provide.  

Key features to look for in reporting tools

Each service provider has a different approach to investor reporting. While many providers adhere to accounting standards from GAAP and IFRS, in addition to laws from the Securities and Exchange Commission (SEC) regarding statements of cashflows, balance sheets, and financial statements, you may find your reporting tool lacking in other areas. 

Look for these key features to ensure you have the best possible platform: 

  • Customizable reporting and dashboard capabilities
  • User-friendly interface
  • Integration capabilities
  • Advanced security features
  • Enhanced analytics

These additional features not only make private equity fund accounting quicker and more compliant, but they also add to the usability of the software. A comprehensive tool should complement your fund structure, not contribute to additional stress. 

How to choose the best reporting tools

Now that you know the benefits of private equity reporting tools and some features to look for, it’s time to decide on the best solution. The most important thing to consider is your overall investment strategy, then evaluate how a reporting tool can help you meet those goals. Here are a few things to consider before making a final decision.

1. Review reporting needs

The reporting needs of institutional investors are different from those of smaller private fund advisers. Understanding what metrics you need to track is crucial, as is partnering with a provider that offers the tools you need for monitoring those KPIs. Be sure to browse available tools to ensure the service provider supports the metrics that matter most to you.

Having a more robust reporting platform at your disposal means you have access to additional information needed to make informed decisions about managing your capital funds. Take an unbiased approach and drill into the metrics you use and those that are merely aesthetic. 

2. Consider installation and integrations

A key consideration when looking for a reporting tool that boosts efficiency is the installation requirements and integration capabilities. Your reporting solution should be easy for your IT team to install, and those tools should work within existing systems. 

Integrations are also crucial for single point-of-truth reporting. Without adequate integrations, you could spend vast amounts of time importing data, and you run the risk of that data being inaccurate. 

3. Read testimonials

The testimony from other private equity firms and users can provide valuable insight into how a provider performs. If similar businesses are not satisfied with how a provider reports on private equity investments or have low reviews, it could be a sign that you will also have challenges with that solution. 

Likewise, a company with solid reviews can illuminate a platform capable of handling your demands. Look for pain points you want to address, search for users with similar challenges, and see if the solution eases those problems. 

4. Request a demo

The saying, “Try before you buy,” shouldn’t apply to retail goods only. The best investment management reporting providers allow interested partners to demo their products before demanding any payment. 

This demo period is perfect for testing how these reporting tools fit within your current system and if it performs as advertised. It also gives you time to ask questions, iron out the kinks, and obtain feedback from your team. 

5. Keep costs in mind

It’s also crucial that you look into the cost of implementing a reporting tool. Some service providers offer tiered plans, which may lock certain features or reports behind a higher level of service. 

A solution may look good on paper, but evaluating the implementation costs could reveal hidden charges you weren’t expecting. Be sure to assess any contracts thoroughly before signing on the dotted line, especially if there are early termination fees. 

Keep a close eye on your private equity fund with Facta

Private equity funds are an attractive alternative investment, especially when markets are strong, and interest rates are low. Although private equity differs from other investment strategies, like hedge funds and real estate, the need for reporting is just as prevalent. 

Not every reporting provider will give you the platform you need to make the best decisions for your investments. Without due diligence, you could end up spending more time on reporting than you did before, which is counteractive to efficiency. 

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