Over 50% of the most critical data are locked up in spreadsheets.
There is a massive evolution happening in how investment firms now think about data – how it’s collected, accessed, managed, consolidated, analyzed. Let’s actually put this into perspective with a real-life story to bring home the growing importance of data and data reporting…
Just this year, a major asset owner paid a $40 million dollar settlement on an asset that it owned (and sold) in 2006. At the time (pre-financial crisis), they forecasted extensive market growth and used data, locked in a financial model built in excel, to secure an attractive bond to finance the project. Now, over twelve years later, they have settled after being accused of using such inflated numbers that it constituted fraud.
Did they mean to mislead investors? No. Did they believe what the data told them at the time? Yes. But we can’t hold the data accountable. After a detailed audit, it was a simple financial model spreadsheet error, and not fraud. However, they struggled with finding the original model, and the final version, and even who touched the financial model as it evolved through the life of the asset.
The hidden risk in data inputs, consolidation, and analysis is one of the biggest fears for today’s global investors. The fact is “you don’t know what you don’t know”. But that’s terrifying when data are being used to report performance, predict future returns, project OpEx, and drive new investment decisions. It’s the lifeblood of the investment and asset management business.
“In alternatives, we have to start harnessing the power of data in and out of spreadsheets.”
Current legacy IT platforms and systems neglect to capture over 50% of the data locked up in excel-based spreadsheets that float around on employee desktops, in document rooms, and in emails. An ALTs fund that has several hundred assets and countless more in the pipeline, which the deal teams are working to close, can have over 1.5M spreadsheets!
The result? The most important data often do not make it into critical decision-making processes. This has a cascading effect on data transparency especially between GPs and LPs, but also spans the lifecycle of an asset.
Investors are also demanding more access, visibility, and transparency into the data behind the reports and projections. Where does it come from? How was it validated? Is it using the right assumptions? Are there new data elements? Can we trust it? Can we see deeper details at the asset level?
Complicate matters even further with the growing diversification and globalization of asset portfolios, which means more data coming from more places touched by more people – yet all critical to the success of that asset and investment. At Mercatus, we’ve extensively analyzed the use of data across more than 300 companies and found alarming inefficiencies and unnecessary risk hidden in silos and legacy systems.
It’s time to get more serious about data management and digital acceleration at an executive level. If you’re not investing the time in thinking about this now, you should be. Risk isn’t looming in the future, it’s here today.
Learn more in this deeper dive report: A Digital Strategy for Alternative Investment Managers…
While the path forward is clear, there is an issue. Leaders today are facing legacy processes and a mix of inadequate, pieced-together solutions and institutionalized status quo bias, inhibiting their ability to shed old habits and embrace the next wave of change.”
