Aligning the interests of GPs and LPs matters more than expense management
WEST ORANGE, NJ (May 18, 2021)—PEF Services, a leading fund administrator for Alternative Investment Managers, today released additional insights from the 2020 PEI Fees & Expenses Survey for Illiquid Alternative Assets in a webinar directed to an audience of over 200 financial professionals including members of the FEA (Financial Executives Alliance.) PEF Services and the FEA hosted a webinar entitled “Why Aligning the Interests of GPs and LPs Matters More Than Expense Management” on April 29, 2021.
Considering the impact of current market conditions, the webinar underscored the need for achieving alignment between the front office and back office operations of the General Partner (GP) firm and between the GP’s firm and investors. Unless investors and GPs can both understand and easily explain and disclose information about management fees, they will be a constant source of pain for the industry and could dampen our industry’s ability to foster the next generation of firms.
Taking a deeper dive into the 2020 PEI Media Fees & Expenses Survey, webinar attendees responded to similar questions through polling. Highlights of the results follow:
1. What is a challenge you’ve had to face regarding resources in the “back office”?
31% of respondents indicated getting additional staff to support their “back office” is a main challenge with 18% citing investments in technology as a challenge. 17% indicated that just getting the front office to recognize and prioritize the operational and risk management needs before something blows up is a challenge. 28% identified staffing, technology, and front office/back office alignment on priorities were all challenges.
2. Which third party resources are highest on your wish list?
To alleviate the burdens between front office and back office pressures, 32% indicated that Fund Administration is high on their wish list for resources. 27% noted “Data Management” services (e.g. business continuity/disaster recovery) while 15% cited “Data Security” (e.g. cyber security).
3. How do you decide on questions about fee and expense allocations which are not addressed in the PPM, LPA or policy documents?
Respondents revealed that 25% consult with outside counsel; 12% allow the management team to decide; while 60% use a combination of outside counsel, management team and select Limited Partners.
“Even if you’re not currently fundraising, the market is still evolving. Front and back offices need to work together in a balanced effort to maximize investor returns while achieving risk management and scalable operations,” said Anne Anquillare, CFA, CEO and President, PEF Services, LLC. “This balance is achievable even when the back office is asking for a slice of the fees and expense pie.”
Now more than ever, reporting standards such as 2020 GIPS® and ILPA are playing a pivotal role in achieving transparency. Investor portal technology also plays a key role in providing effective, secure and transparent reporting.
View the full webinar, Why Aligning the Interests of GPs and LPs Matters More Than Expense Management.
About PEF Services LLC
PEF Services is the new standard in providing high-value, high-touch Fund Administration services, and technology solutions that elevate operational performance to drive and support sustainable growth. Supported by senior professionals with extensive experience in alternative investments, PEF has a track record of nearly 20 years in delivering cost-effective, best-in-class solutions to Funds and General Partnerships, including Buyout, Venture, Emerging Managers, Real Estate, Debt, Fund of Funds, Co-investment, SPVs and SBICs. Additionally, the firm’s LP Administration Solutions Group focuses solely on meeting the unique administration and data needs of limited partners investing in illiquid alternative assets. PEF’s ViewPoint™ provides clients with a purpose-built portal that delivers greater visibility and real-time access to underlying investment performance data sourced directly from the official books and records of the fund. In partnering with PEF, firms increase operational efficiency, control operating costs, improve focus on core capabilities, and gain access to experts in private capital back office operations. For more information, please visit https://www.pefservices.com/.
Senior Vice President