Private markets in the age of transparency

Having spent years demanding greater transparency from their GPs, many LPs lack the ability to interpret and act on the large volumes of data they receive. S&P Global Market Intelligence’s Chris Sparenberg explains how LPs can turn the data deluge into actionable insights.

Private markets are approaching an age of unprecedented transparency. Over the past 15 years, as investors’ allocations to the asset class have tripled on average, the need for more information on the metrics underlying fund performance has increased in-kind.

Investors now require ever more granular metrics to understand the drivers of returns and exposures, as well as the types of risk metrics they are accustomed to for their long-only portfolios. A set of data requests that was once reserved for pre-commitment quantitative due diligence has now become part of the quarterly monitoring process. And GPs are increasingly showing a willingness to meet these expectations, sharing significantly higher volumes of data with their investors. The question is, are LPs ready and able to turn that data into meaningful insight? The answer, in many cases, is “no”.

Turning the data deluge into actionable insight

Having spent years demanding greater transparency from their GPs, LPs are realising they need to acquire new capabilities to interpret and act on the data they receive. For many, the problem is twofold. First, fund and portfolio data is often delivered in unstructured formats such as PDFs, which make it difficult to navigate and analyse. Second, even when the data is delivered in structured formats, LPs don’t always have the digital tools needed to manipulate that data and generate the insights they need.

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