Quantium - Portfolio Management for Private Equity

Software for GPs with Fund Administrators – How Quantium benefits

Some common questions we get from clients during the scoping process are about how Quantium’s software works for GPs who use third-party fund administrators.

To answer our most common queries about how our software works with GPs and fund administrator firms, we sat down to discuss with our Assistant Vice President – Client Solutions, Rae Tan. Rae has extensive fund administration experience and private equity accounting knowledge – she is our go-to expert on the minute details of fund accounting such as calculating waterfall, rebalances, transfers and much more.

What is a fund administrator and what function do they serve in private equity?

Fund administrators play an important role in many private equity firms’ operations. Think of them as book-keepers who manage accounting, track your incomings/outgoings, file your taxes, and assist with investor reporting. They can also take care of all middle to back-office tasks, including KYC, AML, financial reporting, tax filing, ILPA filing, cash transfers, business registrations and more.

In some cases, GPs even have their fund administrators fulfil their Investor Relations function, by having them respond directly  to investors’ questions.

However, fund administrators do have some key limitations – they are not in charge of making strategic decisions on allocations or investments, nor are they involved in the portfolio monitoring process. Their role is to provide timely, accurate data regularly as well as on an ad hoc basis.

Aside from conducting the actual investments and making strategic decisions, most other tasks can be outsourced to a fund administrator as long as they are mutually agreed upon between the fund administrator and the GP. No two private equity companies operate in the same way, so the range of services required will vary from firm to firm.

How Quantium software benefits GPs with fund administrators

The right fund management software enhances your workflows with your fund administrators rather than disrupting them. Here are three key benefits Quantium provides to GPs with fund administrators:

1. Our data engine standardizes all your funds data

Using software like Quantium’s helps with data standardization –  a crucial step before aggregation. Due to legacy or business reasons, some fund managers have different fund administrators for their funds. As such, they receive their data in different formats. Similarly, the same data fields can have different definitions or labels from different fund administrators, which means they will all be calculated differently.

Thus, in order to have a good overview of all the funds’ key statistics, the CFO / Finance team typically need to spend time on manual adjustments to standardize the information. Therefore, having good, well-organized data is essential before any kind of analysis can be done – otherwise, it simply won’t be accurate.

2. Our system ensures accuracy, allowing you to conduct shadow accounting and cross-check your fund admin’s work

The quality of fund administrators’ output can vary dramatically. Some lack quality control and their accounting records are messy, making it difficult for GPs to review historical data or cross check. In other cases, their systems are clunky and inefficient and do not facilitate data transparency or readiness. Very often, GPs need to cross-check their fund administrators’ work to ensure 100% accuracy, which is extremely time consuming and a duplication of effort – poor use of limited resources.

Software like Quantium’s is useful when accuracy is your firm’s biggest pain point. The GP’s finance team can take all the raw data prepared by their fund administrator, enter it into Quantium’s data engine, and compare our system-generated outputs with their fund admins’ work to identify discrepancies. This is extremely helpful with outputs such as Internal Rate of Return (IRR), carry calculations and waterfall  which can be quite complex when there are multiple layers of Special Purpose Vehicles (SPVs) or feeder funds.

3. Our software aggregates all your cross-fund data to give you access to real-time insights – e.g. cross-fund, LP Group, simulation and more

The length of time fund administrators take to respond to data requests can be unpredictably long – not ideal when GPs are being chased by their investors.

Because fund administrators are third-party resources, they usually only communicate with the GP that they’re contracted to work for. Unless your fund administrator is also fulfilling your investor relations function, the process is usually:

1. LP sends GP a data or analysis request.
2. GP reacts by forwarding the LP’s request to their fund administrator.
3. Fund administrator responds to the GP’s request as soon as they can. Depending on the complexity of the request, this can take between one to several days.
4. Once the fund administrator sends the GP the data, the GP forwards this to their LP.
5. If the LP has any follow-up questions, the cycle repeats.

The manual nature of this workflow combined with the constant back and forth means that by the time the LP gets the information they need, it is already several days out of date.

Using the right software can vastly streamline the process above by giving you real-time insights through an intuitive dashboard that’s accessible 24/7. For example, Quantium’s fund management module produces high-level cross-fund/cross-investor/cross-asset analysis with extremely high granularity.

This detailed level of data analysis is usually near-impossible for humans to calculate manually – such  LP’s net IRR per investor group across all associated investing entities. This makes reporting much easier for GPs, their fund administrators and their LPs alike – it’s a win-win for all parties involved, resulting in a better ecosystem for all.

4. Integrated portfolio management and BI reporting and dashboarding tools

Portfolio management is an important function in GP operations. The good news is that you can achieve seamless integration of portfolio data to fund and LP level information prepared by your fund administrators via the Quantium platform. You will be able to easily extract your LP’s personalized position, down to each portfolio company level.

In addition to tracking individual company’s financial KPIs, cap table, investment deal terms and key milestones, you can generate portfolio company one-pagers with the click of a button to complete your quarterly report package.

Quantium also offers built-in toolkits and analytics to help you run performance slice-and-dice analysis by user defined attributes as well as visualize value creation components. We believe in empowering fund managers to take full control of their data, through unifying and standardizing different data sources and leverage modern and intuitive PE-purpose built Business Intelligence (BI) tool to easily query the information, or to build the dashboard and reports that you need.

How Quantium works alongside your fund administrator

As a GP working with an outsourced fund administrator, you don’t want to reinvent the wheel and duplicate all their accounting data on an additional system. You need a single source of truth on which to base your calculations and generate reports.

We provide templates that make it easy for your fund admin to organize their data to prepare it for uploading it to Quantium’s system. These templates can be customized by our Client Solutions team to fit with the format and structure of your existing capital accounts.

Quantium and Fund Administrators - Input TypesInput Method 1 – Fund Administrator’s General Ledger import
  1. Quantium maps the General Ledger template
  2. Fund admin provides quarterly General Ledgers
  3. GP finance team imports and reconciles
  • GP Workload: Medium (approx. 3-5 hours per fund, per quarter)

The fund administrator provides full General Ledgers via a simple template for batch import into the Quantium system on a quarterly basis.

The GP finance team then imports it into Quantium’s fund management module – this is done quickly and easily by dragging and dropping the Excel file into the file drop space. They then spend some time reconciling the data to ensure the correct mapping of investor entity names for capital calls and distributions, or investment related transactions where additional information such as share count and % ownership can be provided.

This method is particularly useful for GPs whose main priority is accuracy and cross-checking the work of their fund administrator. Quantium’s proprietary GL importer tool takes your historical accounting journals and converts them into system transactions, such as capital calls, distributions, deals, fund expenses and so on.

After these transactions are auto-generated by system, GPs can use this data set to generate financial reports, verify IRR and waterfall calculations. and compare to their fund admin’s reports for cross check purposes. This is beneficial because it gives GPs control over their data and the ability to slice and dice at any time. It also allows them to conduct “shadow accounting”, i.e. cross-check their fund admin’s work using smart technology.

Input Method 2 – Excel Spreadsheet of Cash Flow Integration
  1. Quantium prepares Excel template
  2. Fund admin provides data quarterly
  3. GP finance team imports
  • GP Workload: Low (approx. 1-2 hours per fund, per quarter)

Quantium works with the GP and their fund administrator to prepare an Excel template that captures cashflow and valuation updates in the GP’s desired format.

The fund administrator provides data to their GP via this template on a quarterly basis. The GP finance team imports it into Quantium’s fund management module easily by copy-pasting the data directly from Excel into the system.

This gives GPs an updated cashflow and valuations feed to refer to whenever needed. It also allows GPs to cross-check their fund administrator’s carry calculations and NAV, without going through each general ledger and replicating the accounting records for shadow accounting This method is light and simple and fit for organizations whose purpose is mainly for cross-fund, cross-LP data aggregation use.

Input Method 3 – Fund administrator adopts Quantium software

Fund administrator uses Quantium as system of record, inputting all their data directly into Quantium’s fund management module.

  • GP Workload: None

Quantium also partners with fund administrators directly if they are in search of a good system themselves. Fund administrators who use Quantium’s software make fund management much easier for their GP clients, by offering a modern and easy-to-use solution that provides accurate and accessible data.

Fund admins who have in-house IT teams can even build APIs to export Quantium data and perform their own customized data analysis – another GP benefit.

A single source of truth for your fund and portfolio management

As a GP, using Quantium will enable you to run sophisticated simulations on your data set without touching the original data. This vastly simplifies calculating homerun exclusion, portfolio analytics like performance slice-and-dice which are especially useful for track record analysis while fundraising. No more linked Excel spreadsheets with complex formulas!

If you use a fund administrator, they’re not going to be able to help you conduct scenario analysis, for example. Using a fund management system gives you the ability to generate investment insights quickly and accurately, eliminating the need to go back and forth with your fund administrator over several weeks.

Being able to generate your own fund data and reports will vastly benefit you during the fundraising process and enhances your investor relationships. Quantium’s dashboards give you all your fund analytics in real time via mobile or tablet, making on-the-go investor updates easy. Using a fund management system means never being held hostage by your data – you’ll always be able to equip your CFO with the information they need to answer questions on returns, shortfalls, etc.

Portfolio management and stakeholder reporting are also important for GP’s operations. Quantium’s powerful platform enables effortless integration of your portfolio data to fund and LP level information prepared by your fund administrator. We also offer an in-built dashboard and reporting module that allows you to create beautiful reports and real-time dashboards for effective portfolio monitoring and investor reporting.

In summary, Quantium’s software is designed to be completely flexible – think of it as a Swiss army knife for your private equity fund administration processes. It complements the work of your fund administrator, streamlines your interactions with them, allows you to cross-check their calculations to ensure 100% accuracy, or alternatively it can replace their existing system if that’s their preference.

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