Private Equity Alliance Tackles Data Sharing
Private equity firms have launched a data-sharing initiative aimed at standardizing the way they transmit information on complex deals.
The AltExchange Alliance represents the private equity industry’s first comprehensive standard for data formats. The common format defined by this new standard will transform the way general partners, limited partners, fund of funds and fund administrators share, aggregate and analyze data.
“As the asset class has grown, and has become more institutionalized, more data is required by the participating GPs, LPs, and fund administrators,” Karin Lagerlund, chief financial officer at HarbourVest Partners, told Markets Media. “This effort whelps to facilitate the efficient transfer of that data to relevant parties. Today, it’s mostly done manually with people creating their own spreadsheets. This will eliminate the need for individual spreadsheets.”
HarbourVest Partners is a private markets manager focused on fund-of-funds, secondary investing, and direct co-investments around the globe.
The firm invests in all types of private equity funds, including venture capital and leveraged buyout funds, and also directly in operating companies.
Investors in HarbourVest funds include various types of institutional investors such as public and corporate pension funds, endowments, foundations and financial institutions.
Before making a direct investment, an extensive analysis of a prospective portfolio company is performed. HarbourVest’s professionals review a company’s industry, management, business strategy, product/service, market position, financing strategy and competition.
Additionally, its team evaluates the manager alongside whom it is investing, including the manager’s track record in the specific sector, track record of the individual partner and whether the investment thesis of the particular transaction is consistent with the manager’s expertise.
We make co-investments in companies alongside leading fund managers with industry knowledge, cultural familiarity, and investment expertise,” said Lagerlund.
As a fund-of-funds investor, HarbourVest makes direct investments in other private equity funds. In addition, it makes traditional direct investments in companies with other fund managers (co-investments), and also invests in the secondary markets, leveraging its relationships to source proprietary deal flow, perform deal valuation, and develop strategies for complex transactions.
“Some of the other founding members of AltExchnge may be funds that we are invested in,” said Lagerlund. “As part of this alliance, we can provide unique perspective from both the GP and LP viewpoints.”
The Alliance members have collaborated to define a detailed data format, enabling investors to streamline their workflows and analyze data more easily while reducing the fund manager’s workload to support individual requests for customized reports.
“We are often asked to provide varied levels of information to our investors,” said Ed Brandman, chief information officer of KKR, an AltExchange Founding Member. “By adopting an industry standard, we can use a single format for all interested parties, enabling us to provide a more efficient and timely service for our investors. We encourage our investors to join the Alliance.”
The data standard uses tailored XML taxonomies, an open standard, and spans many relevant elements including portfolio company financials, investor organizations and contacts, fund information, cash flows, capital accounts and more.
A unique aspect of the AltExchange data standard is the existence of a corresponding validation platform. Firms using the AltExchange standard can submit a data file to the validation engine for certification prior to distributing or consuming it. This ensures that when a file is received, it can be used by the recipient with confidence.
AltExchange builds on the work of the Institutional Limited Partners Association (ILPA), whose mandate is to advance the interests of limited partners in the global private equity industry.
The ILPA’s membership totals more than 275 organizations globally, including public and corporate pension plans, endowments, foundations, insurance companies and other private equity institutional investors with over $1 trillion AUM.