“You get audited by your investors. They want to know how you monitor your investments. What does your process look like?” said Valentine, who tracks asset management systems for the tech-advisory firm. “When you have a technology system that generates reports that illustrate that you do what you say you’re going to do, and that you have the internal controls in place, that is one way to do it.”
Thus far, most buyout shops have limited themselves to “point solutions,” using a customer relationship management system such as salesforce.com to track prospective investors, or investments, or using online data repositories such as IntraLinks Inc to provide investors with access to confidential documents, but Valentine predicted that more buyout firms would adopt more comprehensive, integrated technology systems. “They start on spreadsheets and they grow to a certain size, and a certain investor base, and they move off into a technology solution.”
One of the most comprehensive, she said, is the Investran platform offered by SunGard Data Systems Inc, which happens to be owned by a group of buyout firms, including Silver Lake, Bain Capital, Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co LP, Providence Equity Partners and TPG Capital. Other providers include eFront, the Burgiss Group and Vantage Software Inc. More vendors also are entering the market, she said.
Asset managers and fund administrators have been the primary users of such software, especially those that deal with multiple asset classes. But Valentine said buyout firms also could benefit from the investor accounting, investor billing, portfolio reporting and client portals that integrated systems can provide.
Such systems can provide more accurate record keeping, including compliance and risk management, based on contemporaneous records compiled and organized at the time decisions are made. The systems also can document a firm’s internal workflow, with integrated document repositories, where auditors can go to find information in order, she said. “It doesn’t carry the same weight to be on a spreadsheet.”
These systems also can protect a firm’s institutional knowledge, Valentine said. “if you have a star performer and they leave you, they have used the firm resources for 10 years to build a network and generate a skill set. When they leave, if you don’t have a technology system, they leave with that expertise, versus if you gather and retain that information as it occurs, you now have intellectual property as a company.”