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Improving the Portfolio Monitoring and Valuation Process

This article originally appeared in Preqin Global Private Equity & Venture Capital Report on January 29, 2015.

Jorge Hansen, Baxon Solutions Director

Jorge Hansen, Baxon Solutions Director

In private equity, as in other asset classes, data management has become both a challenge and a tool that can help create and maintain a competitive advantage in the market.

The Challenge

In the current competitive environment, private equity firms are expected to demonstrate not only consistent superior returns, but also that they can deliver the demanding level of services required by investors. LPs’ growing demand for transparency and data is putting pressure on GPs to generate reliable, granular and timely information related to their investment performance.

As a result, more and more fund managers are turning to technology solutions in order to meet the regulations and expectations of the investment community and maintain a competitive edge in the market.

The Tool: Reporting and Operational Efficiency

Automation is the ultimate form of efficiency. The generation of internal and external reporting of investment performance and portfolio company operating performance has typically been produced in spreadsheets, which are manually intensive, error prone and have limited functionality for analysis. Scaling this reporting granularity and quality can become very expensive and a slow and painful process without the right tools. In addition, in spite of ongoing initiatives such as ILPA or AltExchange, which intend to standardize reporting, not all investors are necessarily asking for the same data. It is therefore vital to adapt GPs’ infrastructure to provide intelligent information to meet specific needs.

In order to meet this demand GPs need to:

  1. Define clear processes for collecting data from their portfolio companies and deal teams;
  2. Count on tools that allow them to further automate a traditionally manual intensive process; and
  3.  Adopt best practices to ensure data quality and consistency, including data traceability and audit trails, formal sign-off processes, etc.

The main focus is to streamline two processes in the post-acquisition lifecycle: portfolio company monitoring and portfolio company valuation.

Portfolio Monitoring

Improving the process of data collection and the management of portfolio companies’ performance data is key to any fund manager regardless of the size of the firm. Investors are demanding more and more details about their holdings, so it is essential that private equity firms have an effective system for monitoring the key metrics of each investment over time, such as P&L, balance sheets, cash flows, and the operating KPIs of its portfolio companies.

Once information has been updated, a robust platform allows for workflow configurations to support sign off of changes and versions, in addition to detailed consistency checks. Once data has been collected, approved and automated, a reporting module allows generation of high quality and visually rich reports. Users can then access the resultant dynamic reports and dashboards from any device (not limited to Microsoft Excel) and share specific data with specific groups of users. Interactive dashboards and analytics tools combined with other existing reports mean that deal teams can access all data on the go, from any type of device.

This interaction allows investors to automatically answer many of their queries, reducing the need to get staff from their investor relations teams involved, thus reducing operating costs. This approach is an important step toward fulfilling LPs’ goal of visualizing data from GPs in a form beyond the traditional PDF report.

Portfolio Company Valuation

The quarterly or semi-annual process of valuation is another example of an extremely manual process, relying on the use of spreadsheets, which are shared among different stakeholders (typically deal teams, finance teams and valuation committee members). The main benefits of rolling out specialized portfolio management software in the portfolio valuation process include ensuring a structured process, control of consistency across the portfolio, full traceability, audit trails and a log of changes. At the same time the software maintains the level of flexibility required to adapt to multiple methodologies, different levels of complexity of waterfalls, etc.

It is also important for portfolio company management systems to be able to cater to the specific needs of the different users within a private equity firm. Deal teams need a way to access updated data and embed it in their own spreadsheets, while finance and investor relations teams require a robust application to automate their monthly and quarterly reporting packs, as well as a way of easily querying data to respond to specific questions from investors or senior managers. Finally, partners and senior management want to be able to gain a high-level summarized view that can be easily accessed from their tablets or laptops, with the ability to interact with dashboards and graphs, and intuitively drill down if needed.

Investing in a robust and flexible portfolio company management solution is not only a way of further improving efficiency and automation, but also a way of improving internal capabilities to service internal users and investors, as well as demonstrating transparency, compliance and adoption of best practices.


The 2015 Preqin Global Private Equity & Venture Capital Report is the most comprehensive review of the private equity and venture capital industry ever undertaken. Covering a wide range of topics, with expert commentary, key trends from recent years, historical statistics, league tables and survey results, the report is an essential tool for anyone seeking to understand the latest developments affecting the industry. For more information or to download sample pages, please visit The 2015 Preqin Global Private Equity & Venture Capital Report.

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