Middle office software failing to deliver for private capital firms is a scenario we encounter frequently.  

In some cases, an inadequate software selection process fails to identify fundamental limitations and misalignment with key requirements from the outset, resulting in failed implementation, wasted resources and no small amount of frustration. 

More commonly we see evolving processes for the GP place new demands on a platform which previously functioned adequately, leading to a gradual decline in efficiency as the software fails to keep pace. 

In either case, rising dissatisfaction eventually prompts firms to contact our portfolio monitoring experts at Holland Mountain. This article will examine the five leading factors we encounter which cause frustration alongside our advice for GPs seeking a way out of this undesirable position. 

5 reasons why your portfolio monitoring fails. 1) Can’t keep up with reporting demands 2) Integration hiccups causing headaches 3) Not adaptable to changing data needs 4) Data transfer tech mismatches 5) Communication gaps leading to inefficiencies

1. Can’t power reporting

Software failing to power more complex reporting processes is common, and especially frustrating when a vendor made assurances to the fund manager that requirements could be met.  

Firms investing in expensive software are often left questioning the value proposition when the most time-consuming tasks such as generating vital reports and completing valuation processes are still being done manually and inefficiently. 

The first consideration for our consultants is to determine if re-configuring the system could solve the issue – which does often lead to improvement. If not, identifying a platform which is better aligned with requirements is a possibility, but we will also consider workarounds such as integrating data with external reporting tools which offer more power and flexibility  – including the more flexible PowerBI-based reporting of our own ATLAS data platform which has pre-built connectors to leading software vendors in the middle office space. It is not uncommon to find that on-platform calculation engines are relatively basic in nature and cannot cope with more advanced logic statements. 

 

2. Failure to integrate 

Where failure to integrate with other technology is evident from the outset, this almost always results from failing to test a platform’s capabilities at an appropriately granular level during a selection process. It’s not enough to tick a box based on a vendor providing API access – best-practice assessment demands proof that specific data points are available in the correct format to fulfil requirements. We have uncovered limitations with API endpoints, Excel plugins, ability to export in rich text format and other headache-inducing issues which would cause major problems had they not been identified early in the process. 

While discovering a fundamental inability to power a required integration can be fatal, we would consider the wider Enterprise Data Strategy and look at alternative approaches for getting data from A to B before making the suggestion to begin the search for an entirely new platform. 

 

3. Doesn’t support the evolving data model and analysis strategy 

Understanding the needs of various stakeholders throughout the firm and effectively translating these into requirements and implementation design is key. However, even if this exercise is initially completed successfully, evolving requirements can lead to misalignment and frustration over time. 

For example, a client of ours which implemented a rigid, uniform template for portfolio company data was unable to satisfy the demands of portfolio managers later seeking to collect additional, company-specific KPIs until we helped to reconfigure the system. 

Another common issue we see in this area is the level of data required, firms seeking to map data at four or more levels (add-ons, portfolio companies, legal entity, fund family etc) may encounter issues with certain platforms, especially if the decision to get more granular is made post initial implementation. We also encounter issues where a firm expands into new asset classes such as credit or venture debt which have unique requirements an existing software is not equipped to support. 

We experience some variation of this issue frequently. If we agree that the portfolio monitoring software is the appropriate tool for the data requirements in question (ESG for example often demands a standalone platform), re-configuration will always be the first consideration. If the need for a new platform is determined, ensuring that data requirements are well documented is vital for successful selection. 

 

4. Data ingestion misalignment 

We’ve seen significant advances in the technology applied to transferring data between portfolio companies and fund managers – both as part of a complete portfolio monitoring solution and increasingly as standalone offerings. Options range from data templates, PDF and Excel extraction – some of which leverage machine learning and AI to enhance performance, and more recently direct integration with underlying portfolio company systems such as Quickbooks to power data transfer. 

Vendors make competing claims as to which represents the optimal approach; our experience has been that different technologies perform better in different situations – the maturity of the portfolio company, GP investment strategy (what data rights does the GP have?) and industry must all be taken into consideration. 

We help our clients navigate options here through careful consideration of requirements and through sharing our experience of what has worked well – and vice versa – for other firms we have worked with in comparable situations. 

 

5. Communication breakdown 

Portfolio data collection and reporting involves many moving parts and requires careful administration – especially as portfolios expand in size and scope. Having effective tools to manage the progress of key workflows and tasks is vital. Furthermore, an audit trail tracking the data source, how data points change, who changed them and when is also desirable from an oversight and risk-management perspective. 

When inaccuracy and inefficiency in the process starts to impact timeliness and accuracy, existing software is rightly placed under the microscope. 

Where communication and oversight issues are prevalent, our approach is to define the people and processes required to support best-practice workflows. Maximizing the potential of existing products to underpin effective administration is always the first consideration before considering alternative or in some cases additional technology solutions. 

 

Should we stick with our existing solution, is there a better option? What is the ‘best’ product? 

We are often asked this question during an initial call with a client. It is impossible to answer because it really does depend on the unique circumstances of the firm in question. What we can say is that there are some newer, powerful options in the market for portfolio monitoring… at the same time, vendors with established products continue to innovate and improve their solutions.  

We often find that frustrations with an existing product can be solved by reconfiguration or re-implementation, especially in cases where a client has not benefited from recent enhancements and are stuck on an outdated version. 

Our approach to fixing middle office issues is therefore unbiased and open-minded. Our favored approach is to first conduct a software assessment, a tried and tested process designed to quickly highlight key issues and provide a roadmap outlining recommended steps for fixing or replacing the existing solution, allowing our clients to make informed, confident decisions about next steps. 

After completing many successful projects in this area for a wide range of GPs, we can say with confidence that whether the decision emerges to improve what they already have or seek an entirely new vendor, improving the quality and efficiency of the portfolio monitoring process is possible 100% of the time. 

Interested in learning more? Talk to our experts!

Get in touch with us today to set up a call with our middle office experts for an initial assessment and explanation of our services.