How to Get Started with Portfolio Management Software

In private equity, funds without modern tools continue to struggle with data management and investor reporting.

Set your firm up for success in 2018 by adopting a portfolio management software system.

In the current competitive environment, private equity firms are expected to demonstrate not only superior returns but also the ability to deliver the high level of services required by LPs.

Investors ever growing demand for data is putting pressure on GPs to generate accurate and timely information related to their investment performance at both the high and granular levels.

In light of this, fund managers are turning to technological solutions in order to meet these expectations and maintain a competitive edge in the market. 

Automation is Essential to a Modern Fund’s Operations

The traditional method of reporting of investment performance and portfolio company operating performance has typically been copying and pasting data into spreadsheets, which is often error-prone, manually intensive and leaves limited time for proper analysis.

Scaling this approach without the right tool can even become expensive from a staff resourcing perspective. In addition, not all investors are necessarily asking for the same data. It is therefore vital to adopt a reporting tool that provides high-quality information that meets every need.

In order to meet this demand GPs need to:

1. Define clear expectations for collecting data from their portfolio companies.
Learn How Adding a Technology Platform Clause to Your Information Rights Can Achieve Just That.
2. Adopt a portfolio management system that automates the data collection process.
3. Adopt best practices to ensure data quality and consistency. An established company that provides automated software should be able to advise on best practices.

It is through this process that GPs will be able to get started with a portfolio management software system, effectively. 

Communication Aligns Key Stakeholders

As mentioned, investors are demanding more details about their holdings, so it is essential that private equity firms have an effective system for monitoring the key metrics of each investment over the long term, such as balance sheets, P&L, and other KPIs of its investee companies.

To ensure investor satisfaction, GPs need to not only adopt an automated system but communicate the metrics their LPs will be receiving ahead of time. More and more firms are also doing this with their portfolio companies.

“We set reporting expectations early on and have an open dialogue with our entrepreneurs about what metrics will be tracked, so everyone is on the same page. This also allows us to define KPIs with portfolio companies, which I think helps with governance, makes future financing rounds easier and overall leads to more impactful datasets.”
- Matthew Leibowitz, Plaza Ventures Why Automation is Good for Business at Plaza Ventures [Customer Story] 

Once data has been collected and approved, a powerful portfolio management system will allow for high quality and visually rich reports. Interactive dashboards and other tools combined with other existing reports mean that firms can meet today’s market expectations.

Investing in a robust and flexible portfolio management software solution is not only a way of further improving efficiency and automation but also a way of improving back end capabilities to service investors, as well as demonstrating transparency, compliance and adoption of best practices.

Portfolio automation is part of a modern fund’s operations. So, if you’re still stuck hitting (Ctrl)+C and (Ctrl)+V, it’s high time you adopted 2018 technology.


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