Customized Reporting Requests Swamp PE Firm CFOs

The finance departments of private equity firms have a big challenge ahead: mastering timely and transparent reporting to investors.
Matthew HellerFebruary 17, 2015
Customized Reporting Requests Swamp PE Firm CFOs

With private equity investors increasingly looking toward operational excellence in deciding which funds to invest in, CFOs PE firms must master the complexities of timely and transparent reporting, according to a new Ernst & Young report.

Transparency demonstrates operational excellence and is an effective way for PE firms to gain a competitive advantage, the survey says. The vast majority of PE firms that participated in the survey said they receive up to 25 customized reporting requests a year.

“Our survey clearly shows that investors have added operational excellence to their definition of performance, with 49% of those surveyed identifying it as their top concern beyond track record,” Scott Zimmerman, EY Americas private equity assurance leader, said in a news release. “As a result, firms are counting on CFOs to drive business changes and strategically position their firms to win the competition for capital.”

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[contextly_sidebar id=”CZEctaajYE4Z9d0t1y6THIBVo1ZVPMhf”]Investors indicated to EY that they have little patience for information that moves slowly, with nearly all indicating they want quality data — fast. Three-quarters said they want tax reporting within four months after year-end.

“Overall, private equity firms expect requests for customized reports to increase with incremental asks for both quality and quantity,” the report noted.

To handle the increased workload and meet investors’ rising expectation, EY recommends that CFOs looking at new technology and new processes, including outsourcing. Investors are comfortable with PE firms outsourcing tactical areas, including tax and fund accounting, but would prefer compliance, investor relations, portfolio analysis, and valuation to remain in-house.

For those functions that remain in-house, EY says, private equity firms that “are data-centric and defined by superior management, analysis, and digital presentation of information will find success.”

“Unquestionably, innovation and optimization, implemented according to each firm’s needs and capabilities, will allow businesses to scale, minimize resource constraints, and enable CFOs to focus on strategic priorities,” the report adds.

Sixty-six percent of private equity CFOs said transparency was the best way to improve investor reporting, followed by timeliness (50%) and frequency (12%).

The survey was conducted by Private Equity International and consisted of telephone interviews with 32 CFOs and finance executives and 50 investors, from September through November 2014. In addition, PEI conducted an online survey to which 116 CFOs and finance executives and 58 investors responded from August through November 2014.

Featured image: Thinkstock

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