Emerging Managers Compete on Data and Transparency

We spoke with Jeff Williams, Senior Vice President at Private Equity Software Provider Altvia Solutions, on the demand for more data and transparency, and how GPs can compete

As PEVC matures and more LPs allocate to a market with no shortage of managers, how has the relationship between LPs and GPs evolved?  
The balance of power dynamic is always an interesting one because the GP-LP relationship is literally, technically, and in spirit a partnership. Historically, however, many LPs had a strong case for arguing against that. I don’t think there’s any question that’s changing, and we may be seeing a shift in the balance of power. The influx of capital has been driven in large part by increased interest from institutional investors whom we know expect more transparency. This, together with the rise in the number of emerging managers and the evolution that has led them to compete with larger GPs, has undeniably led to greater acceptance of LP demands for transparency.

PEVC has seen significant consolidation with larger GPs assuming a greater share of LP commitments. How have factors like portfolio transparency and on-demand data shaped the competitive landscape?
It’s extremely difficult to differentiate in today’s market, especially as an emerging manager. The emerging managers that are successful are in most cases turning to technology, and while some are simply using technology more efficiently than others, the majority are establishing new standards on how they’re telling potential LPs a story. At the core, these stories are truly data driven and use deeper data insights and correlations to value created. What’s more, often this same data is being used to create a new ‘customer experience’ by providing data for LPs to explore themselves, on demand. This has created opportunities for emerging managers, but we’re also seeing more large GPs come around to it as well.

The GFC put risk management back into focus, which was further honed by the COVID-19 pandemic. How have LP demands for data and transparency evolved over the past decade, and are GPs willing to meet those demands?
What we’ve seen in this market since the GFC is exactly what you’d expect: a desire by LPs to better understand the underlying assets. Given that many of these portfolio companies are privately held, it’s entirely up to GPs to provide LPs with data to help them assess their own risk.  

While the transparency dynamic is still a work in progress, we’re seeing more GPs willing to meet those demands. I think COVID-19 may have helped GPs see why this is so helpful. After the initial shock, it became clear which industries were the most at risk – namely retail and hospitality – and that GPs couldn’t hide behind, nor be blamed for, those risks. More so, LPs are signing up to take risks – there’s more opportunity to provide them with the transparency they need to assess it than the potential damage to the relationship that may come from not providing it.

About Jeff Williams
Jeff Williams started with Altvia in 2011, bringing with him industry experience as an Associate at a leading fund of funds, Greenspring Associates. Through his tenure, he has led various departments and has worked externally with clients to make the vision of Altvia come to life by solving the issues GPs and LPs face.