5 minutes with… Monel Amin, DiligenceVault
The Drawdown (TDD): What is DiligenceVault and who are its core clients?
Monel Amin (MA): DiligenceVault is a due diligence technology platform that streamlines diligence processes, which is still conducted via Microsoft Word, Excel and PDFs, for LPs and GPs.
For LPs, it systematically collects clean, usable, timely data rather than using hundreds of Excel and Word files.
For GPs, DiligenceVault acts as a centralised platform for all DD data, enabling them to reuse content and collaborate as a team. For example, if they’ve answered a DDQ for one LP and a second reaches out, the GP can repurpose relevant responses through our platform. It effectively automates a huge amount of the process, creating efficiency and enables them to focus on the quality of the responses.
TDD: The platform launched in 2016. In what ways has DD changed in PE since then?
MA: Due diligence has changed in five key ways. First, the depth and frequency have increased, with a greater focus on risk management at the operational and firm-level. This results in greater focus on ODD and cyber security factors for private markets.
Second, demand for PE and private markets strategies has increased, meaning we have lots of new LP types entering the market. This creates different diligence needs. At the same time, sophisticated LPs have become more data-driven and lots of LPs’ data teams now use DiligenceVault for data governance and data science projects.
Third, increased frequency of fund launches. Fund sizes have also increased, meaning more LPs commit to the same fund. Generally speaking, 25% of LPs accept standard materials for DDQs/ODD, 25% accept standard materials but also send custom questionnaires, while 50% have their own custom DDQs/ODD. The focus on in-depth and custom DDQs is common with institutional investors.
Fourth, Covid meant there’s been a faster transition to digital DD while we were all in lockdowns. Furthermore with the restriction on travel, the frequency of monitoring diligence and data exchange has gone up. I’d imagine an element of this will continue going forward.
Fifth, the focus on DEI and ESG has increased significantly with GPs and LPs wanting more data and higher transparency. GPs now engage with their portfolio companies to get the right information, create their own frameworks and measurements in order to report back to their LPs.
TDD: You’ve recently updated the platform to include DEI and ESG questionnaires after partnering with the ESG Data Convergence Project and the Asset Owner Diversity Charter. Are any further partnerships on the horizon?
MA: Our mission is to make the diligence process easier for LPs and GPs. One of the biggest friction points we see is the lack of standardisation. Diligence standards have emerged, but adoption remains sub-scale. Given DiligenceVault’s footprint, we’re always looking for ways to contribute to the transition in our industry via collaborations through our networks. We currently have 40,000 users in more than 100 countries, so we’re in a unique position to make an impact.
The Asset Owner Diversity Charter is led by LPs. Similarly, the ESG Data Convergence Project is a collaboration between LPs and GPs. If a large group of LPs agrees to use the same standard, it solves much of the adoption problem, and eases the burden on GPs.
TDD: What specific types of questions are being asked across D&I and ESG?
MA: For D&I, we’ve seen more questions focus on gender, but also ethnicity, origin and/or citizenship. LPs want in-depth breakdowns at the GP level. For example, partners vs non-partners, investment teams vs operational functions, and so on. They want to see if there is true diversity at all levels throughout the organisation, as well as in the governance boards.
Continuing that data flow, GPs now ask for this same information from their portfolio companies.
Outside of quantitative and KPI data collection, firms are trying to understand the framework for promoting diversity. LPs are asking qualitative questions such as:
- Is diversity simply a data collection and reporting exercise?
- Are you truly rewarding your organisation and team members on certain hiring decisions they’re making, from a diversity perspective?
- What policies/frameworks do you have in place and how are these adapting?
- How do you encourage diversity across functions?
Regarding ESG, we’ve seen various questions around ESG integration and reporting, especially for LPs and GPs that have committed to net zero. These include data collection around carbon footprint, alignment with SDG goals, how these metrics translate at the GP level and so on. With regulations such as SFDR coming into effect in Europe, it’s becoming a much bigger focus area for systematic data collection at scale.
TDD: Do you think DEI or ESG could ever be truly standardised?
MA: I think DEI is more likely to be standardised first, but not 100%. One challenge we’ve seen regarding DEI standardisation relates to jurisdictional and data privacy nuances. Some data that is collected within DEI is considered personally identifiable information (PII) within certain data privacy laws. The challenge is how do you capture or disclose that information? And some individuals simply might not want to disclose everything. If firms don’t capture all the information as part of their policy, how can they disclose and report on it?
Another example is how data tracking differs by region. For example, Asia generally tracks nationality, whereas the rest of the world tracks ethnicity - so how do you compare the two, when they aren’t comparable? They’re two completely different data sets.
TDD: A number of GPs have expressed the lack of available quantifiable ESG data, and are seeking more quantitative, measurable data going forward. What are your thoughts?
MA: I couldn’t agree more. Lack of consistent and quantifiable data is a huge problem for two reasons. One, the actual data collection is manual and time-consuming, which subsequently makes reporting harder. Two, standardisation, which would help facilitate the right data collection and reporting, doesn’t yet exist.
Reporting is still in its infancy. GPs have to deploy frameworks, but it requires using specific technologies to do it efficiently. It’s almost impossible to collect quantitative or qualitative data consistently from numerous stakeholders, on a periodic basis, manually.
I believe fund administrators are key stakeholders in solving some of these data challenges. They have access to some of this data and can help provide the scale the industry needs. Technology platforms like ours help solve data structuring issues while systematising the process for scalability. At DiligenceVault, one of our key priorities is to apply technological power to digitise ESG KPIs and frameworks so hopefully, that’ll make the process easier over time.