What does the AI platform have to say about PE Fund Administration?

It appears there is no question ChatGPT can’t answer – but just how much does ChatGPT really know about private equity fund administration? Our industry experts queried the platform and react to its answers.

We Asked

As private equity has matured as an industry, how have fund structures and reporting evolved to keep pace with the increased sophistication of LPs?

ChatGPT Answered

As the private equity (PE) industry has matured, fund structures and reporting have evolved to keep pace with the increased sophistication of Limited Partners (LPs). Here are some ways in which fund structures and reporting have evolved:

  1. Increased Transparency: PE funds have increased the level of transparency in their reporting to meet the growing demand for more information from LPs. This includes providing detailed information on fees, expenses, and performance, as well as regular reports on portfolio company performance.

Our Take

Authored by: David Meyerchak, Principal
Updated on: February 24, 2023

As PE reporting has matured, transparency into underlying investments, data management, and overall communication have improved significantly. One area to highlight is the use of online portals to obtain real-time access to information. About 20 years ago, a 90-day lag in quarterly reporting was not uncommon - even for non-Fund of Funds - and an LP received that information via regular mail, fax, or email. The implementation of online LP portals has not only increased the security and protection of LP information but has also facilitated more timely information and the industry continues to trend in this direction. The core of an LP portal is having reliable data on a timely basis and then having the technology to transform that data into meaningful information for LPs. Gen II’s Sensr® reporting platform allow us to provide our clients and investors with the information they need when they need it.

Fund structures have continued to evolve and become more complex over the years to meet the increased demand and sophistication from LPs. Tax, legal, and reporting ramifications are the main drivers that we generally see. On the tax side, investors have become increasingly familiar with the tax ramifications of their PE investments and are requiring structures that fit their needs. Whether it’s blocking ECI and obtaining treaty benefits on FDAP income for foreign investors, blocking UBTI for tax-exempts, or a myriad of other reasons, the structures of PE funds have become much more complex to make them the most tax efficient for investors and minimize risk. We have also seen an increase in the complexity of structures for various legal reasons, generally to help facilitate the purchase of certain investments or to allow investors to participate in certain fund structures based on their local laws and regulations. We’ve also seen an increase in Series and Tranches within fund structures to accommodate the increased desire from LPs to track performance and vintages.

As a pioneer within the fund administration industry, Gen II has played a key role in the evolution of reporting and fund structuring, and our commitment to continually learning and improving will keep us on the cutting edge as the industry continues to evolve.