WATCH: Data strategies for a digital world
The industry’s tech evolution
The classic adage in the private capital funds market is that it has been slow to adopt new technologies. It finally feels like that is changing. But why now?
Bogue explains the two key drivers behind this. First, the impact of the 2008 downturn, causing LPs to better analyse private portfolios and understand exposures. Second, advances in technology, such as performance and CRM systems.
The starting point for data management
As the volume of data PE firms now have - these large data lakes: what are the first steps?
Bogue shares insights from working with a range of clients on cleaning up their data. She asserts that the most important first step is data harmonisation; in almost every case the data you care about is in different places (cashflow data with admin, deal cash flows in excel, deal attributes might be in a portco system) but what you need to do is to bring all of that together.
Bogue advises that it’s best to look at individual areas or smaller chunks to start with so you can focus and learn, then move onto the next.
What does operational excellence mean in the context of data?
In terms of working backwards; what is the ultimate goal? What does operational excellence look like for data?
According to Bogue, the main challenge is typically firms have data owners and data users, who are not always the same people. For example, the finance team maintains information about deals and cashflows, but the deal team might need it for something, and IR for something else. When you have everything in excel or separate systems there’s always a need to double or triple check.
Buy or build?
It’s tempting for many GPs to build internal systems as it seems more cost-effective, with the key benefit of full control. But what are some of the hidden costs, and risks, of using an in-house platform or BI tool?
Says Bogue: “My view has changed on this. Previously there weren’t a lot of options. There were accounting based technologies but nothing purpose built for the types of data, analytics, performance data for this space.” But today, buying something that exists means you’re always going to get better tech because that’s what that company does and you benefit from other client requests. “I think it’s definitely better in today’s world to at least look at what’s out there. And maybe that’s taking a platform and building it to your needs.”
Harnessing and leveraging data
What are other ways GPs are harnessing and leveraging data?
According to Bogue, GPs want the ability to leverage data internally; to really drill into performance. A lot start with wanting to be able to understand themselves better, and through that start finding points of differentiation. In today’s competitive fundraising market being able to not just tell your value creation story but show quantitative proof is a huge advantage.