Portfolio monitoring and management are critical processes for private equity firms. With the growing sophistication of private markets and institutional investors’ portfolios over the last decade, the automation of portfolio management and monitoring has become more critical than ever. This is especially true since value creation and ESG have become focus areas for private equity firms. Let’s start with a quick look at portfolio management and portfolio monitoring and why they are important in private equity.

What are portfolio management and monitoring in private equity?

Portfolio management is the process of overseeing a collection of assets or investments to meet specific investment objectives. The goal of portfolio management is to optimize returns while minimizing risk. 

Portfolio monitoring is the ongoing process of tracking and assessing the performance of a portfolio to identify changes that may affect investment outcomes. Portfolio monitoring involves tracking and analyzing the performance of a portfolio of assets or investments. This includes tracking market conditions, economic indicators, and other factors that can affect the portfolio’s performance. The goal of portfolio monitoring is to identify trends and make adjustments to the portfolio to maximize returns and minimize risk.

Challenges private equity firms face

Historically, fund managers have been inclined to use manual, spreadsheet-driven processes to perform portfolio management. However, as data volumes continue to rise, many find that investment data management becomes a large pain point. Specifically, manual portfolio management hampers investor reporting and internal data administration. Additionally, investors and regulators are demanding more transparency with respect to portfolio performance, which means fund managers are spending even more time manually managing data in spreadsheets.

Because of the reliance on manual portfolio management, portfolio and fund managers frequently lack the data and analytics needed to produce useful insights. With no single source of truth for data collection, it is very difficult to assess the performance of portfolio companies or make informed investment decisions. This inevitably leads to missed opportunities. 

To enhance fund managers’ capacity to make informed decisions efficiently, private equity firms must invest in reliable investment data management systems and analytical tools. This is why firms are looking to leverage technology to help streamline and enhance internal operations while providing better visibility of data. By automating portfolio management and portfolio monitoring, fund managers can improve both the speed and accuracy of portfolio management and monitoring.

Benefits of automated portfolio management

Automating portfolio management streamlines the process of managing and monitoring a portfolio by leveraging artificial intelligence (AI) and machine learning (ML). Overall, automation helps fund managers make more informed decisions by providing real-time data and insights into performance. Additional benefits of automated portfolio management include:

  • Higher efficiency: By minimizing manual workflows, automation reduces the time and resources required to manage and monitor a portfolio, giving fund managers more time to focus on other critical tasks.
  • Improved accuracy: Automation reduces the risk of errors in data entry and calculation, ensuring that fund managers have accurate information to make informed decisions.
  • Real-time Data: Automation delivers real-time data and insights into portfolio performance, allowing fund managers to make decisions quickly.
  • Customizable reports: Automated portfolio management software allows fund managers to generate customized reports, making it easier to share portfolio performance with stakeholders.
  • Lower risk: Automation helps identify and manage risk more effectively, reducing the likelihood of losses due to unforeseen circumstances.

The best way to achieve higher efficiency and faster decision-making through automation is with a single portfolio management solution. An integrated platform should provide a comprehensive view of the portfolio, allowing investors to track portfolio performance metrics, analyze trends, and make confident decisions about asset allocation and risk management. 

How IVP can help 

The IVP for Private Funds platform provides a 360-degree view of the deal lifecycle with complete transparency. It can be used for a wide range of portfolio data management functions, from streamlining the data collection process to providing analytical dashboards and information required for investor reporting. 

By standardizing financial data templates and eliminating the need for manual intervention across portfolio companies, insight generation, and reporting are made easier. IVP for Private Funds also helps users identify patterns in critical metrics by analyzing data across portfolio companies, sectors, and industries. Additional features of IVP for Private Funds include:

  • Fully customizable to accommodate unique data points and reporting formats
  • Out-of-the-box reporting dashboards
  • KPI tracking and management
  • Tracking and management of financials and covenants using built-in machine learning 
  • Data adaptors to many third-party aggregators
  • Fully customizable closed-deal blotters with data audit capabilities
  • Real-time mobile access to portfolios

Learn more about IVP for Private Funds or contact sales@ivp.in to set up a demo.