Alternative Investment Management as the name suggests offers alternative ways to traditional investing. This includes asset classes such as Private Equity, Venture Capital, Private Credit/Debt funds, Fund of Funds, and Real Estate Funds. These are privately pooled investment vehicles that collect funds from financial institutions and high net-worth individuals (HNIs) to invest in unlisted privately owned enterprises. Over the last decade, Alternative Investment Management has emerged as one of the most prominent investment options as investment opportunities in this space have increased multifold due to the growing trend of entrepreneurship among the youth and the revamped government policies that support small businesses with an intention to increase employment opportunities.
Talking specifically about Private Equity, typically, a Private Equity firm evaluates hundreds of investment opportunities per year wherein the evaluation process for each investment opportunity may stretch over months if not days, making the life of investment managers more hectic. The growth in investment opportunities has brought its fair share of challenges and made it difficult for investment managers to handle important business processes such as keeping a track of investment opportunities, monitoring portfolio investments, tracking fundraising, and managing investor relations and reporting with traditional tools such as Excel. The Covid-19 pandemic has further added to the woes of investment managers pushing the need for easy access to data and collaboration with geographically split teams. All this has forced the investment managers to seek refuge in technology and look out for complete private equity investment software, that fits in the current uncertain business scenario.
With the advent of cloud computing in recent times, technology providers have come to the fore with innovative SaaS (Software as a Service) solutions for the investment industry. Private Equity is not an exception to this and has captured the eyeballs of various new-age technology providers. There are various private equity investment software solutions available in the market that focus on different processes of the private equity investment lifecycle. Some of these solutions are focused on the front and middle office processes such as CRM, Deal Pipeline Management, Investment Management, Portfolio Monitoring, Fundraising, and Investor Relations management while others are focused on back-office processes such as Fund Administration and Fund Accounting.
Although innovative and simple, such process-specific solutions may not be a perfect fit for the industry, as they compel the investment managers to employ different solutions for different processes. This leads to further challenges such as the restricted flow of data from one solution to another, multiple versions of data, and resistance to technology adoption by investment teams. To address this, some technology providers like PE Front Office have designed end-to-end private equity investment software solutions that cover the complete spectrum of private equity investment lifecycle and eliminate the need for multiple solutions. Additionally, these end-to-end solutions come with a plethora of benefits such as real-time data accessibility; faster implementation cycles; ease of customization; built-in reports and analytics, and seamless integration with third-party data sources.
To conclude, due to the lack of dedicated IT teams and fear of data security, many Private Equity firms have continued to rely on human intellect with minimum support from technology. However, with increasing competition in the Private Equity industry, investment managers have no choice but to turn technology savvy to be on top of their games. With new-age private equity investment software solutions, a growing number of Private Equity firms are now recognizing the importance of investing in suitable technology, and the road ahead definitely seems to be far more technology-enabled.
Authored By: Arjun Mehrishi (Director – Sales & Marketing, PE Front Office)