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Tech transformation tracker: Key findings

by Alice Murray 18 October 2021

Our Tech Transformation Tracker, in partnership with IQ-EQ, was designed to check the pulse of the industry’s transition at this pivotal and fascinating point in time. We wanted to know if managers are really moving away from Excel and manual processes, towards more sophisticated and automatic systems.

The first section of the survey dug into the core functions of a GP’s back, middle and front offices, detailing the proportion of respondents outsourcing, insourcing or using software systems for each task. We found that almost half (46%) of respondents use accounting software. This highlights the complexity of PE accounting, and tells us that Excel is no longer up for the job, instead specific solutions are needed.

A large proportion of the respondents are currently looking for new software solutions for core back and middle office functions (fund administration 34%; compliance and reporting 33% and waterfall distribution 33%). This indicates the accelerated pace of change when it comes to technological infrastructure.

All conversations today around technology and software in private equity inevitably come down to data. The second half of our report showed private equity is alive to the importance of good data, and can clearly see the opportunities brought about by harnessing data science. However, there is a long way to go. The majority of those surveyed (62%) do not currently have a data lake. While a handful of the respondents (13%) rated their current data practices as being highly effective - most (74%) said they were average. Despite these admissions, data holds the key to the industry’s future, with 29% of those surveyed predicting their LPs will request direct data feeds into their systems in the future.

The findings from the survey, while providing an insight into PE’s current use of technology, also offer a glimpse into the future. For example, while only 15% of those surveyed use software to assist in fundraising and investor relations, this group were the most happy with the solution they use. When a technology is effective, it is likely to become mainstream.

Conversely, respondents were least happy with their fund administration systems. With a large majority (65%) of those surveyed using these systems, this finding highlights a clear pain point for managers, and provides new entrants with an opportunity to disrupt the traditional market.

Another key finding centred around cyber security, which has gained a great deal more attention over the past year, with PwC reporting that 80% of private equity firms have experienced a breach in that period.

Of the fund managers surveyed, 79% have a cyber security policy, with 46% having a cybersecurity system in place. Interestingly, 79% believed having a cyber security policy or system has influenced their ability to fundraise – demonstrating the increased scrutiny of LPs when it comes to robust security systems.

What this report makes strikingly clear is that the role of technology in private equity is a vital one. And returning to our central question; is private equity moving away from Excel? It’s clear to see the industry’s embrace of technology has accelerated dramatically over the past 18 months.

To view the full results, click here.

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