Bridging the data gap at PE firms

The global private equity (PE) arena is undergoing a data-led transformation. 

The industry’s ability to harness and analyze vast troves of disparate information has become crucial to success in investments. A study by PwC in 2023 showed firms incorporating unstructured data into their investment decisions see a 30% increase in return on investment compared with competitors.

For a sharper competitive edge, PE firms must achieve the capability to collect, analyze and interpret large amounts of data from diverse sources, such as general partners (GPs), limited partners (LPs), portfolio companies, customer reviews and others. 

The big challenge here is that 80% of such data is typically unstructured, which means extracting valuable and actionable insights is a significant ask. In particular, analyzing sentiments from company financials provided by GPs and other private sources can offer insights that can be harnessed to arrive at appropriate investment decisions. 

On their part, PE firms are turning to platforms that extract, process and analyze complex data, providing valuable insights and intelligence to enable informed investment decisions. Such platforms collect and process data from various sources and apply advanced analytics and machine learning techniques to extract actionable insights. 

Exhibit 1.1: Typical process flow of a data platform 

Though PE firms consider data platforms a useful source, they often find the quality and reliability of data low. According to a recent market survey, 40% of the PE firms said data taken from these platforms is mostly outdated, inaccurate and incomplete. 

Global PE firms we interact with also feel the prevailing solutions typically achieve an accuracy of only 70-75%, leaving a residual 25-30% to possible errors, which are attributed to various complexities and challenges. This, despite the notable advancements data platforms have achieved in recent years.

Exhibit 1.2: Challenges data platforms pose to PE firms

Effective decision-making by PE firms is a function of the quality of data sourced, with accuracy, integrity, completeness and consistency the hallmarks.Traditional data platforms often struggle to adapt to the unique data requirements of firms owing to rigid, often templated, processes. This leaves a crucial gap that needs efficient, tailor-made bridging.

Enter domain experts, who can identify the shortcomings and implement the corrective actions, such as:

Crisil Integral IQ offers a DataBridge framework by synergistically combining human expertise with automated validation, effectively merging the benefits of technology and domain knowledge to improve data quality, accuracy and delivery timelines.

It is designed to integrate seamlessly with the legacy process structures at PE firms, aligning perfectly with the platform's output format to ensure a smooth and efficient data exchange.

By employing a hybrid validation approach that combines manual expertise with a tailored automated validation model, the framework identifies and rectifies inconsistencies and errors in the platform's output data, providing a robust and reliable foundation for downstream processing. 

A subject matter expert (SME) finetunes the validation and computational parameters to resolve erroneous, missing or computed data, making the framework dynamic and adaptable.

Manual validations and corrections are performed as a final quality control check to guarantee the accuracy and integrity of the data before it is transformed for integration with the user's system.

The framework not only improves timeliness and refines the delivery of data but also, through data visualization, empowers more effective and data-driven decision-making processes.

Exhibit 1.3: Our customized solution

Data analytics is spawning a paradigm shift in how PE firms make investment decisions. However, traditional data platforms are coming up short on processing ability because of data inconsistencies and integration issues.

To overcome, the PE industry needs to adopt advanced validation frameworks that combine automation with an overlay of human expertise. 

Crisil Integral IQ offers customized solutions that focus on advanced validation, mapping and synchronization processes that ensure data accuracy and consistency, offering high-quality insights in a timely manner and facilitating seamless integration.

Our solutions can help optimize portfolio performance, mitigate risks and unlock new investment opportunities.

PE firms can rely on us to make informed investment decisions with confidence.