One of the first questions I get asked by new clients is, “What are other firms doing that we should be doing?”. C-level leaders want to know what ‘best-in-class’ looks like for Private Capital operations, technology and data, and then how to achieve it. At Holland Mountain, we think about operational excellence using four pillars: People, Process, Technology and Data. Below are some of the key themes we have seen emerge in each of these areas.
The size and structure of Private Capital operations teams have changed significantly in recent years, particularly when it comes to technology.
Before the introduction of cloud-based software, firms relied on large teams to manage and maintain the IT infrastructure. Most solutions are now SaaS-based, with infrastructure support and maintenance covered by the vendor. To manage these tools effectively, firms are increasingly hiring highly specialist ‘system owners’, who often sit within the business rather than reporting to IT. With business requirements continually evolving to meet client needs, the role of the system owner is to bridge the relationship between the vendor and business users, unlocking maximum value from the investment in the technology. Without a dedicated platform owner in place, we’ve seen instances where user adoption drops off and the system quickly becomes obsolete.
The role of the CTO or Technology Lead has shifted in the same direction. Now that less infrastructure management is required, this role has broadened to cover oversight of a suite of SaaS applications, overall data governance and change management.
When we review a firm’s processes, we’re always looking out for the important details that have the potential to make the biggest impact. Large scale change is sometimes unavoidable but can take time to implement and embed. In some cases, we know that planning a series of incremental adjustments will make more sense than a ‘big bang’ approach. Of course, every Private Capital firm is different. The benefit of using a partner like Holland Mountain is that we can help firms tailor their approach to fit the specific situation. For example, ahead of a Private Capital software implementation, we can help operations teams identify micro-adjustments that will help streamline the transition to a system.
The business function where we tend to find the most opportunities for process improvements is fund administration. For the firms that outsource fund administration, there is often significant duplication of effort and manual reconciliation taking place between the fund administrator and the firm’s internal finance function. By enhancing access to data on both sides using a solution like Holland Mountain’s data platform, we can quickly create significant efficiency gains.
Many Private Capital firms now have multiple solutions in place across the front, middle and back-office, or at least one or two of the three. The available solutions for these core functional areas have not changed significantly in the last 5 years. Technological advancements have come from specialist players delivering niche, add-on functionality to enhance the core solutions.
Due to limited integration capabilities, many firms find it difficult to leverage new technology. Firms already have several different interfaces that business users must log into to find the information they need. The Private Capital firms that are best placed to leverage innovative new technologies are those that have a data aggregation layer in place that enables them to bring in new technologies very quickly.
One of the fastest-growing areas of interest is data. As more Private Capital firms have replaced Excel spreadsheets with specialist technology, the amount of data they can capture and analyse at speed is increasing. This brings a new set of challenges, with siloes of inconsistent data across investor relations, investment teams and finance, and no way to aggregate information into a single source.
To help Private Capital firms benchmark themselves against their peers, Holland Mountain has developed a data maturity scale. Many companies are still at a relatively early stage on the journey to ‘Data as an Asset’, which means there’s lots of value left to unlock. Looking ahead, the more advanced firms will be exploring AI & machine learning technologies that offer forward-looking, predictive insights. As GP’s shift their focus to improving the quality and accessibility of data across the firm, they’ll need a defined data strategy, and a data platform to provide a single source of truth from which all downstream data outputs can be driven. An effective data solution provides senior executives with a consolidated view of data across the business, enabling better-informed decisions.
Operational Excellence is increasingly about data. Overall, better data means a higher quality investor experience, the ability to make better portfolio decisions, and the ability to identify deals faster.
Jeremy is a leading expert in Private Capital operations, technology and data. He has 20 years’ experience advising GPs and LPs on operational strategy & best practice, alongside delivering successful change management engagements. He has a wealth of experience working with all the major industry software vendors & service providers, and a detailed understanding of the capabilities & limitations of available solutions.