Responding to investor and regulator scrutiny

September 25, 2020

Private equity and venture fund managers face an increasing barrage of detailed and probing questions daily. Examples:

  • “What is the exposure of your portfolio to a downturn in the transportation sector?”
  • “How many of your companies have published environmental sustainability plans?”
  • “Can you document how you arrived at that valuation?”

The source of this inquisition? Current investors, prospective new funders, and, sometimes, government regulators. In other words, people whose questions must be answered. Which is why VC and PE managers are spending ever more time on scavenger hunts through folders of spreadsheets, PDFs, and email chains.

And if you’re thinking there can’t help but be a better way, there is. Cloud-based portfolio monitoring platforms can now gather, analyze, and report the financial and performance data from every company in a VC or PE firm’s portfolio. Users of these systems extoll their time savings, error reduction and risk-management improvements. And, not least, such platforms make it much easier to respond to investor questions, due diligence reviews, and regulatory inquiries.

Here’s what these groups are asking for most, and where a portfolio monitoring solution can help firms give it to them:

Potential Investors

They want: High return with mitigated risk and a way to pick among the many funds competing for their dollars.

  • Due diligence by institutional investors often searches for signs of operational risk, such as technology that presents inaccurate or out-of-date information.

Portfolio monitoring can:
Create structure and precision in fund operations.
  • Systems and procedures used to document the flow of funds, as well as portfolio company performance, should be well documented and consistently applied.
  • Information needed to answer questions that come up in due diligence or ongoing requests from investors should be readily available in a customized, centralized platform without the need for manual calculations.

Current LPs

They want: Deeper understanding of what they invested in.

  • Investors are no longer satisfied with standard quarterly reports.
  • They expect information on a wide range of concerns, proactive notification of portfolio issues, and immediate answers to any question they think of.
  • Many are also concerned about the environmental, social, and governance (ESG) metrics of the companies in their portfolios.

Portfolio monitoring can: 
Provide real-time answers and insights.

  • Build dashboards that can calculate concentrations of exposure, components of return, and comparison to relevant benchmarks.
  • Tracking system for measures of progress by portfolio companies against ESG goals.



They want: Compliance with regulations meant to protect investors and the public.

  • The Securities and Exchange Commission is increasingly checking whether the valuations used by private fund managers are based on standard accounting principles, consistently applied, and scrupulously documented.

Portfolio monitoring can: 
Provide evidence that valuations are not arbitrary or manipulated.

  • Any portfolio monitoring system used to track indicators used in valuations should include an audit trail that can document the source of each number and when it was modified.


To understand more about the capabilities of portfolio monitoring platforms and how to select the best one for your firm, download our quick and easy guide here.