COVID-19… Private Funds Are Starting to Lean into The Fight

Four weeks into COVID-19’s assault across the U.S., private funds are starting to regain their footing and fight back.

BlackRock has ridden into the fray to reinforce the New York Federal Reserve and buy up bonds. The alternative assets industry, despite taking early hits, is back in favor.

Things are expected to get worse on both the healthcare and economic fronts. But a sort of grim resolve has also settled in across the ranks of fund professionals as we all come to terms with the new reality and what we do and don’t have control over.

Starting to dig in

Where are fund professionals beginning to carve out some degree of control?

Allocators and asset managers are checking their way through their portfolio to sort out the damage and any bright spots. Most importantly they are working to better understand how much is illiquid, or not as liquid as previous models had suggested.

GPs are updating LPs and working to communicate consistently, avoiding selective disclosures in the highly asynchronous world we now live in. But as the human and financial casualty checks keep coming, GPs and their fund administrators are having difficulty finding enough experienced bodies to confirm where working capital and valuation stands. Those professionals can only go so fast, and have to err on the side of being conservative.

The velocity and multivariate dynamics in valuations and calculating management fees, distribution waterfalls and claw-backs add to the pressure on people and the technology that worked well enough until now. Statements are proving especially challenging given fund-level financials lean on the ability of portfolio companies to report their status in the middle of a fire fight. Some unfortunate asset managers and their lawyers are pouring over fund documents, looking for room to go beyond standard statement deadlines, when they and LPs wish they could shorten them.

The middle and back office are struggling to keep up, but they’re digging in from kitchens, bedrooms and living rooms across the globe.

Call in air support

We can see it all unfolding because this is the sort of environment when the next generation of technology is grabbed off the shelf and put into the fight. It took World War I to see airplanes become mass produced tools of war, and then give birth to civil aviation after that.

Right now, SaaS based solutions that enable scale and efficiency for the middle and back office functions of funds and fund administrators are the new surveillance and airstrike capability that make advances possible.

We’re now rushing to revolutionize fund operations and data management by enabling firms to move away from current inefficient point-to-point legacy systems that will make the next months more painful. Funds and fund administrators are trying to find the quickest and most effective path to move to an integrated platform approach that consolidates key data, and orchestrates transparency into data operations in a way that was previously impossible.

It would have been better to have it in place in January. But now is not the time for fatalism.

Experience counts

Past experience does help, however. Our proprietary technology, Conductor, was developed through 15 years of engineering and continual refinement in complex, real-world financial environments including the Great Recession. Our tech has helped serve 27 thousand limited partners across 700 unique fund and finance vehicles.

With more than 75 years of combined experience, the Harmonate team is made up of seasoned technology and financial professionals with a proven track record of success. With our solutions, fund data operations can move up to 80 percent faster than current methods. Our technology is serving 27,000 LPs across 700 unique fund and finance vehicles.

Reporting, middle and back office operations through our solutions can turn in an 80 percent cost savings. Think of that as that much less pressure on working capital.

Lines of communication

It’s not just capital efficiency. How do asset managers keep allocators up to date when everything is changing so fast? As Alex Lynn of Private Funds CFO reports, without solutions in place it’s basically impossible.

Funds are wrapping their heads around Q4 2019 valuations. Philippa Kent at the same outlet looked at what to check for when assessing whether service providers can hold up against the COVID-19 onslaught.

What it amounts to, as we’ve said already, lines of communication are the equivalent of life lines to maintain trust and meet what’s next. But success is possible, and data operations can put eventual victory in reach.