Private Equity CFOs Must Modernize to Keep Pace

Private equity firms have grown assets under management by 120% from $2 trillion in 2013 to $4.4 trillion in 2022, according to a recent Private Funds CFO publication. But have their systems kept pace?

In a recent trend report from Lionpoint, an alternative asset consulting firm, Danny Olds explains the plight of many private equity firms that have significantly increased assets under management in the last few years but are now struggling to implement the right systems and processes to manage ever-increasing complexity.

According to Olds, “Most firms are small at the outset and satisfy treasury-like needs with a lack of end-to-end automation…These solutions tend to be heavily reliant on Outlook and Excel, with a tremendous amount of time spent in bank portals.”

The increasing pressure on cash and subline management has highlighted the inadequacy of home-grown systems for treasury management, and now, a more stringent regulatory environment is forcing higher levels of transparency for PE firms. A recent survey by S&P Global highlights the growing role of Private Equity CFOs in managing the new regulatory environment. According to the report, “The role of the PE CFO is undergoing a fundamental change. In addition to their traditional focus on financial oversight, CFOs are embracing a growing list of new responsibilities, spanning from technology developments to regulatory assessments and more.”

For today’s Private Equity CFOs, modernization can take on many forms, but as yet another survey reported (this one from Ernst & Young), the top finding is that CFOs know they must “build out the company infrastructure to better support decision-making and improved reporting to key stakeholders.”

But it doesn’t stop there, the bottom line is that infrastructure must support returns in a meaningful and measurable way. Hazeltree’s active treasury and intelligent operations technology improve returns by identifying and optimizing trapped capital and enabling total liquidity management. Purpose-built for the alternative asset management ecosystem, Hazeltree’s modular platform aggregates internal and external data, providing a comprehensive view of operations and counterparty relationships while proactively highlighting opportunities to extract more value from every transaction. Seven of the top 20 private equity firms globally are using Hazeltree to operationalize finance, manage liquidity and gain more visibility to debt allocation.

“As a user of the platform, we have found Hazeltree to be a transformative technology solution, allowing us to increase the speed and reliability of our treasury operations and gain greater security over our cash management processes.”

Erik Hirsch, Vice Chairman and head of Strategic Initiatives at Hamilton Lane