AbsolutReport, AbsolutSpezial, Article

Private Capital Analytics – Support for investment decision, risk management and controlling

Introduction

The private capital market – once a black box with few highly specialized investors – is becoming increasingly transparent due to the rapidly growing availability of data. Large database providers supply investors with structured market data on fund managers, funds and underlying deals in illiquid asset classes such as private equity, infrastructure, real estate and private debt. At the same time, investors are collecting data on their investment portfolios in ever-greater quantities and higher granularity. Even smaller limited partners compile extensive data on their invested funds and portfolio companies, loans or real estate properties on a quarterly basis. The higher demand for transparency for investment portfolios is being driven by two key developments:

  • Increasingly, regulations require a detailed and deep look-through of investment portfolios from fund level down to the underlying assets.
  • Internal stakeholders such as board members, risk managers and controllers are gradually increasing the requirements for internal management and general data standards. Requirements that have always been common for liquid investments are now also being extended to illiquid asset classes.

Improved data availability makes it easier to develop sophisticated statistical models, which can be applied to practically any private capital portfolio. Procedures that only a few years ago were only used by a few large fund-of-funds managers are now being increasingly applied by pension funds, insurers, banks and family offices. The knowledge and insights made possible by such statistical models can provide a valuable basis for investment decisions, risk management and controlling.