There’s probably never been more risks facing private markets than now, as attendees at PEI’s CFOs & COOs Forum Europe in London heard last week.
CFOs and COOs are struggling to attract and retain talent, understand and comply with a constantly changing and growing regulatory regime, are wary of a proliferating set of cybersecurity threats and, for some, raise funds in a highly competitive market and chaotic economic outlook.
Mid-market and emerging managers are facing all of this while continuing to institutionalise and professionalise their firms in response to LP demand, sometimes with resistance from the front office.
“We got a lot of resistance from the front office,” said Lindsey Ord of Climate Fund Managers, a climate change-focused investment firm. “But they’re seeing the importance of putting in assumptions (into new tools) that can give you a great view.”
Even so, change is always a hard sell. “We’ll just keep pushing ahead,” Ord said.
Building a tech platform that frees up CFOs and COOs is critical and needs to be done with careful planning and caution. Ord noted that while it is important to approach solving data and tech issues with an open mind, “the most important thing is to be really clear on your requirements”, or you risk a clumsy architecture.
Meanwhile, even as cybersecurity threats grow in number, insurance companies are refusing to issue policies to those who don’t already have them – at present, policies can only be renewed. And even if you do have one, it’s not clear it will pay off. ‘Read the fine print’ is the watchword, because, as one participant said: “It feels like the insurers are setting you up to fail.”
Two CFOs on one panel alone reported that servers used by portfolio companies had been hijacked for crypto-mining, while a CFO speaking privately about her (and others’) challenge of getting internal support and buy-in to her cybersecurity efforts said: “How do you get your people interested in cybersecurity? You get hacked!”
Below are some choice quotes from panellists at the forum.
On novel fund types: “This shift to open-ended funds will have material implications for valuations,” said Vincenz Rentsch, a member of management, investment services at Partners Group. “Clean governance has to be clear about who’s responsible for valuations. Maybe I also have to think about involving a third party… (it’s) definitely the ask from investors.”
On data transparency: “[I keep my team focused] on the use case for the data as well as minimising the manual tasks in the data process as much as possible,” said Sahem Gulati, head of strategy and consulting at M&G Investments. “We are working with an outsourced provider, it takes 90 percent [of the] burden off the front office. You need to have a place for your unstructured data too – the data warehouse. We use Snowflake, and a lot of our clients do, too.”
On recruitment: “We had 350 applications for two positions and narrowed it down to seven interviews and nobody we had were going to be a perfect fit,” said Isha Doshi, partner and CFO at TLG Capital. “It’s (still) incredibly difficult to find skilled staff.”
Write to the author at graham.b@peimedia.com
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