Going Big and Coming Up Short
In the private equity industry, investors and other stakeholders are increasingly demanding better service and greater transparency. Unfortunately, PE managers are finding it hard to get both—let alone one—from the biggest and best-known administrators.
In some cases, they had decided to play it safe and went with the familiar, an issue we discussed in “Private Equity Funds: Outsourcing to Growth.” Others had been enticed by flashy marketing and the promise of access to the latest technologies, including software designed to crank out reports at the press of a button. A few had decided based on a past relationship, even if their “ex” was no longer the partner they once knew.
Whatever the reasons, many firms have discovered that the big firm reality didn’t match the hype.
Indeed, based on the feedback we’ve gotten from clients and prospects, large-and-well-known often turns out to be less-than-it-seems. Among other things, just because a firm has a hefty headcount doesn’t mean that they are on call for every client. In fact, most larger firms only have the bandwidth to provide best-in-class service to their largest clients, leaving small and middle-market funds with inexperienced service teams.
In addition to the numbers, it’s the knowledge and experience of those on the front lines that sets smaller administrators apart from super-sized rivals. At E78 Partners, for instance, the teams that work with clients include senior and seasoned executives—accounting professionals who actually do the work and understand the calculations behind the numbers. Many are CPAs with Big Four accounting and PE industry experience, fully accountable for delivering what clients expect.
At the mega-firms, in contrast, the teams servicing other than the biggest clients tend to be made up of relationship managers and system operators, rather than accountants and PE industry experts. They may mean well, but they are relying on specialists elsewhere in their firms and “black box” systems that offer little visibility into where the outputs come from. For the most part, the focus at name-brand administrators seems to be on volume and efficiency rather than quality and transparency.
In our view, servicing clients is not about pushing buttons or reaching out to others when the need arises. It’s about striking the right balance between process and technology, on the one hand, and expertise and efficiency, on the other. In a world where stakeholders increasingly want to know just what is going on under the hood, it makes sense to work with the professionals who put it all together in the first place.
More than the basics alone
That said, a clear focus on block-and-tackle accounting basics isn’t the only thing that sets the Davids of the PE fund administration industry apart from the Goliaths. Smaller, more nimble firms can also offer the kind of flexibility and support that has little place in an outfit where the primary focus is on growth and scale. Instead of relying on black box technology or plug-and-play systems that often require clients to alter their ways, we focus on providing fully tailored solutions.
Then there are intangibles that an experienced front-line team can bring to the table. At E78 Partners, we recognize that we occasionally need to go out of scope. Whether this means sharing insights about launching a fund or coaching clients on the emerging manager’s playbook, we understand the value of an empathetic personal touch. We see our engagements as long-term relationships, not simply in terms of what is written in our client agreements.
To learn more about the big value of partnering with a smaller PE administrator, please contact Chris Rakers at firstname.lastname@example.org.