due diligence

How to meet transparency needs without overloading investors?

Custom, time-saving digital questionnaires on an efficient, centralized platform can replace manual, error-prone Q&A procedures

As the years roll on, fund managers are continuously increasing the amount of information they share, from everything about their products to opinions on global macroeconomic events and outlooks.

However, this has led to an undesirable result. Fund selectors are finding themselves inundated with a high volume of emails, updates, and an information overload from fund managers. And lately, this flood of data has increased.

The pandemic has exacerbated the situation by limiting diligence communication to digital channels. This results in the bulk of reporting and updates happening via video conferencing and email, which is overloading investors’ inboxes.

Investors simply cannot get through it all; when time is of the essence, this potentially leads to skipped-over details, which can result in uninformed and costly decisions.

But is the excessive outflow of information from fund managers resulting in higher transparency?

Investors Are Happy with Transparency but, There’s Room for Improvement

The good news is that the level of transparency among managers has improved.

For example, 92% of Limited Partner (LP) respondents to the Brackendale LP Private Equity Sentiment Survey 2020, expressed general satisfaction with their fund managers’ transparency efforts during the coronavirus pandemic.

Managers are becoming more proactive in flagging issues and important events related to performance, operations, structure, or staff changes.

However, there is room for improvement, especially in asset classes such as hedge funds, which typically share less data about their investment techniques, or in general with specific areas like portfolio holdings or outflows.

Better transparency for fund investors entails the following:

Clear, concise, and consumable data exchange
Investors want data that they can easily use to conduct further analysis, simulation, or comparison. It is not enough to have incomplete or non-structured data. Even data stored in PDF file formats is not entirely accessible enough for these purposes.

Frequent performance updates and risk reports
The new normal in communication between investors and fund managers often consists of weekly performance updates, monthly risk reports, and regular management calls.

Position-level transparency
Investors require asset managers to provide position-level transparency both before and after investment. Even though investors recognize confidentiality around trading positions, they want to factor into a fund’s strategy.

They wish to see sample portfolios before deciding on an investment. Furthermore, investors want to be acquainted with the portfolio’s life cycle once they make their investment.

While the intent for transparency exists, how can information be more easily accessible, organized, consumable, and specific to investor queries? And how can analysis be done in a timely manner?

Flexible data and technology exchange tools can help.

Maximizing Transparency and Minimizing Overload with Data and Technology

Fund managers’ increasing willingness to be more transparent and share more data is one part of the equation. But it goes hand in hand with investors having the right technology tools to analyze information properly and timely.

With the help of flexible data exchange tools, investors can set the proper expectations, collect the right amount of information, and analyze fund data faster.

Technology that automates manual tasks related to data exchange helps avoid human error and time-consuming, rote managerial tasks.

Contact us for a demo today to learn how our platform can help fund selectors increase transparency while decreasing data overload.


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