Accounting and Investor Reporting Abstract: A multibillion-dollar hedge fund manager with a presence in the private equity sector decided to significantly grow that part of the business. With the impending launch of a new multibillion-dollar private equity fund, the firm contracted to license and implement a robust application to handle its private equity investment, investor accounting and administration needs.
Prior to launching the new fund, the client had multiple pre-existing private equity funds, but investors in these funds were fairly concentrated among a few legal entities. With the new fund projected to have over 100 limited partners and having complex and unique requirements, it was critical to design and implement a highly automated and integrated infrastructure to support the unique needs of the private equity business.
The pre-existing client relationship management system’s capabilities were not fully exploited for the hedge fund business. This resulted in limiting the usefulness of the system and the data contained within it. Data integrity was questionable and reporting capabilities were restricted to a standard set of reports that were supplied by the vendor, which were ineffective in addressing the client’s needs. The client wished to exploit the capabilities of the system for the investor relations process, which included all aspects of investor reporting. This meant expanding the types of data stored within the system; analyzing, populating and scrubbing various data elements; developing custom reports; developing procedures and exploiting existing functionality. This also included building integration between the new private equity investor accounting system and the relationship management system.
- Core implementation of new private equity accounting system – design, configure and migrate historical data
- Enhance the client relationship management system to meet the needs of private equity and convert all related investor relationship data and processes to the system
- Integrate the new private equity accounting system and the relationship management system
- Migrate pre-existing private equity funds onto the new platform
- Initiate the new fund onto the new platform
At the outset, a series of interviews were conducted and process/system walk-throughs were provided by key client personnel to obtain knowledge concerning the current systems and processes surrounding them. In addition, high level design discussions were scheduled to discuss the proposed handling of the new private equity fund with respect to investor setup, partner allocation rules, capital calls and distributions, investor letters, deal processing, valuation, IRR calculations, client relationship management and other reporting requirements. Lastly, detailed data analysis was performed on the existing client relationship management system’s database to determine table and field usage.
Once this initial analysis was performed, a project definition document was prepared and circulated for discussion. This document defined such things as the project’s overall goals & objectives, project scope by phase, deliverables, major milestones, assumptions, resources and key dependencies. Once agreement was gained, a detailed project plan was prepared and executed.
- Project completed on time and on budget over a 4 month span
- Significantly enhanced the scalability of the private equity line of business
- Greatly improved internal controls through the retirement of Excel spreadsheets which were previously used in critical calculation and recordkeeping functions
- Converted over all historical data from the predecessor system to new private equity accounting system
- Designed and implemented new Private Equity Accounting System with the following functionality:
- Chart of accounts and hierarchies
- Journal entry templates to capture and track entries on both the fund and limited partner allocation level
- Configured settings to allow for the automated posting of recurring transactions
- Dynamic and static allocation rules to allow for the specialized allocation needs designated within the partnership agreement.
- Tracked qualitative and quantitative data on portfolio companies and investments by a variety of criteria
- Dynamic IRR calculations at the deal and investor levels
- Developed and tested 19 custom reports
- Client Relationship Management System (CRM)
- Designed and tested system customization to accommodate storage of capital call and distribution transactions
- Managed the testing and upgrade to a newer version
- Designed and developed custom Crystal Reports and stored procedures for Partners
- Capital Statements, Capital Call Letters and Distribution Notices
- Managed the data validation and scrubbing effort to clean up key data needed to accommodate reporting and mass investor specific mailings
- Accounting System/ CRM System Interface
- Specified requirements and coded data extracts for Capital Balances, Capital Calls and Distributions
- Designed middleware database application used to retrieve raw files, perform validation checking and execute concatenation and transformation logic prior to loading data into the CRM
- Prepared detailed process flow and procedure documentation and trained client personnel on all processes