June 28, 2018
Data and Technology: The Basics
The rise of data and technology has already started impacting the private markets. Given the steady growth of private equity in the last 20 years, it is no wonder that Limited Partners (LPs) are investing more and more in the private markets as it becomes easier to raise capital and source deal flow. There seems to be a seismic-shift taking place in the private markets for both LPs and General Partners (GPs).
Realizing that data and technology are becoming more prevalent, Hamilton Lane and Cobalt collaborated for a webinar around this topic. The webinar kicked off with Rasmus Goksor, CEO & Co-Founder of Cobalt, mentioning: “For LPs, the asset class is getting complex and LP teams are stretched thin attempting to cover the market as well as their own asset allocations. For GPs, we see increased competition when we go to fundraise, and increasing demands from LPs surrounding data services,” In correlation with recent technological advancements, as well as increased competition, the effective use and management of data has never been more important for both LPs and GPs.
We have entered an age where the effective utilization of data and technology can be a key factor in whether or not a GP is able to effectively fundraise. It is paramount to have “domain expertise across a variety of different areas, and to invest back into a franchise to make it stronger,” Erik Hirsch, Vice Chairman & Head of Strategic Initiatives, Hamilton Lane.
Better Understanding Data
There are several misconceptions around data transparency and data access. It is very clear to industry leaders that the issues around data are undoubtedly mutual and do not fall just with LPs or GPs. According to Erik Hirsch, “One of the things as an industry that we will have to be candid about and start to resolve is that this is a mutual issue. LPs need to invest in their infrastructure and their own systems and their own data gathering as do the GPs. I don’t think it can be a one way street here.”
“The analogy I use is that if you go into an LPs’ office or any investors’ office and they say to you that they are running their public equity exposure and their purchasing public equity securities and then they don’t have a Bloomberg terminal or a computer, you would find that surprising. Those seem to be required tools of the trade in order to actually be vassal and adept and what they are trying to do. And yet when you walk into that same office and you walk inside to the private markets team, it is not at all uncommon to have no tools at their disposal,” Erik Hirsch.
Better Understanding Technology
There seems to be a shift in the way that technology is used in the private markets. Incorporating technology allows LPs to be more active in the space, similar to how technology is used in the public markets. “The analogy I use is that if you go into an LPs’ office or any investors’ office and they say to you that they are running their public equity exposure and their purchasing public equity securities and then they don’t have a Bloomberg terminal or a computer, you would find that surprising. Those seem to be required tools of the trade in order to actually be vassal and adept and what they are trying to do. And yet when you walk into that same office and you walk inside to the private markets team, it is not at all uncommon to have no tools at their disposal,” Erik Hirsch.
Solutions to Utilizing Data and Technology
Cobalt, a single analytical interface that helps users control data, benchmark performance, and power decisions, is changing how LPs and GPs are thinking about private markets technology. Cobalt also helps manage portfolio workflow, enhance diligence workflow, and analyze market data. With Cobalt on their team, LPs are able to run ad-hoc analytics to better understand and analyze their private markets investments.
