Reporting in private markets – how to make BD+20 a reality
25 April 2025 - In the world of private markets, the landscape of limited partner reporting is undergoing a significant transformation.
Historically, the quarterly reporting cycle to limited partners operated with a 45-day lag for delivering Net Asset Value (NAV) reports, but the industry is changing. Leading managers in the sector are exploring ways to achieve faster reporting deadlines to satisfy demands from both existing institutional clients, and new types of end investors who are accessing private markets for the first time.
There is also a push for greater transparency with respect to the reporting limited partners receive, particularly around data points. While recent regulatory pressures on reporting timelines have subsided in the US post the vacation of the Private Fund Advisers Rule, an increasing number of managers see the benefits of embedding faster reporting regardless, as it can remove bottlenecks and pressure points in their businesses.
This evolution is bringing private markets closer to the reporting standards of other alternative investments, such as hedge funds, which typically provide month-end reports within 3-4 business days.
Such a transition represents a significant change in the industry's approach to transparency and information dissemination, and it requires co-ordination, co-operation and a willingness to embrace change.
How can private markets funds optimize their operations to achieve quicker turnarounds?
The answer lies in automation and digitizing the process. Traditionally, private markets have had a lot of unstructured data, such as deal docs in paper/pdf form, or on excel spreadsheets. The first step to speed up reporting is making this unstructured data structured, putting it in digital form so it can more readily be automated to facilitate automation downstream.
By leveraging advanced technologies and streamlined processes, fund managers can now reconcile various elements of their reporting – including expenses, loan interest income, and other critical components – daily. This approach ensures that fund books and records are consistently up-to-date, providing greater transparency for all stakeholders involved.
To support the changing landscape, the Citco group of companies (Citco) has built a bespoke, multi-tier engine capable of performing complex calculations daily at the touch of a button to facilitate fast reporting. This engine, which is constantly being updated, allows users to handle the bookkeeping and reporting of complex fund structures by establishing relationships among legal entities, producing intra or related company transactions and automating combined reporting for multi-tier structures with specific consolidation and reporting requirements.
This powerful tool allows users to efficiently review the work, make necessary adjustments, and validate the reports much faster ensuring greater accuracy. The automations in the tool also provide the ability to compute and automate multiple types of intragroup transactions, such as Equity Pickup, Investments look through, Fair Value Adjustments, Consolidation and other Group Transactions.
In turn, these sophisticated automations gather the necessary information automatically and feed it into the overall NAV calculation. This innovative approach streamlines the reporting process, reducing the time and resources required to produce accurate and timely NAV reports.
Going hand in hand with this is data. Modern data platforms like Citco Data Services offer managers a place to migrate middle-office and back-office data from disparate vendors and systems to a single platform. In turn, these can be merged with other third-party datasets to help meet the demand for greater transparency into portfolios from LPs.
Looking ahead
While automation has greatly improved the speed and efficiency of NAV reporting, some aspects still require manual intervention or subjectivity and judgement by individuals. Valuations remain a challenge as they often involve complex and bespoke assessments that cannot be fully automated today and do require a high degree of judgement and subjectivity from the individuals involved in producing valuations.
Although the “art vs. science” nature of valuations will remain a hindrance to the full automation of the valuation process, this should not impact the ability of a fund manager to accurately and efficiently calculate the impact of carried interest. A fully automated waterfall calculation engine forms a core part of this and has gone from a “nice to have” to serving as a core component of a fund administration offering. This has become even more essential as changing market conditions require real-time waterfall scenario analytics and projections to assist managers making time sensitive decisions as to whether to realize or defer carried interest. Citco’s solution, Citco Waterfall™, not only ensures that carried interest will be calculated with full accuracy and efficiency, but also allows the user to run complicated exit scenarios based on both actual and projected valuations.
Looking further ahead, with the advancement of AI there are hopes that in the future the complexity involved in such bespoke calculations will be automated and the manual elements will become less prevalent.
Collaboration with clients
Having the right tools available is crucial, but it is important to note here that collaboration with clients cannot be understated in achieving faster reporting.
There must be buy-in from clients to re-work core processes for in-house teams so that the outsourced provider gets the data and information they require when they need it. This joint effort between clients and outsourced providers is fundamental to achieving faster reporting and it cannot be achieved without it.
Embracing the future - achieving BD+20 timeframes
By adopting a daily processing cycle with bespoke technology and fresh mindsets as above, combined with a truly collaborative approach between in-house and outsourced teams, fund managers can pave the way for compressed timelines for quarterly reporting to limited partners within 20 business days (BD) – a timeline that significantly outpaces the current industry average.
This is not a pipedream – Citco is working with clients now to deliver quarterly +20 BD NAVs for private markets clients, and that timeline will be further compressed over the coming months and years.
This accelerated reporting schedule not only meets the increasing expectations of investors but also provides fund managers with more timely insights into their portfolio performance.
Service providers like Citco are evolving beyond traditional quarterly reporting cycles in private markets, offering enhanced reporting frequencies - from monthly to daily updates. This advancement significantly improves transparency for both investment managers and their limited partners.
While valuation complexities pose challenges, more frequent reporting delivers substantial advantages: enhanced decision-making capabilities, optimized resource allocation, increased productivity, and greater scalability.
As the industry continues to evolve, those who can adapt to these new reporting standards will be well-positioned to meet the growing expectations of investors and stand out in an increasingly competitive landscape. By embracing automation, streamlining processes, and developing innovative approaches to valuation, fund managers can successfully navigate this transition and deliver the timely, accurate information that today's investors demand.
