The launch has garnered a great deal of press in the business community, and with good reason. The AltExchange data exchange standard is aimed at solving one of our industry’s most vexing and fastest-growing problems: how to effectively process ever increasing volumes of data. Untile now, firms can receive hundreds of different files in different formats and, consequently, have been spending far too much time and resources manually re-keying and reconciling information and less time analyzing data.

Having the transfer of data automated and having an agreed-upon industry-defined data standard will help address this costly inefficiency The common format defined by this new standard will transform the way general partners, limited partners, fund of funds and fund administrators share, aggregate and analyze data and enable firms to provide a more efficient and timely service for investor.

Founding members of the exchange include fund-of-funds and asset managers such as Aztec Group, Capital Dynamics, Grove Street Advisors, HarbourVest Partners, StepStone; limited partners such as the University of Texas Investment Management Co.; and private equity firms such as KKR. eFront is also a founding member and has developed the technology platform that supports the exchange and validates all data transfers.

It’s important to remember that AltExchange is really an exchange for information, not a data warehousing initiative. Nor is it a substitute for the efforts of investment groups such as the ILPA and IPEV, who have also been pushing private equity firms to adopt a reporting standard. They will continue to exist, and the Alliance will continue to work with them as the data standard continues to evolve.

The challenge now is adoption and how to promote adoption. This cannot take the form of forced compliance. Instead, it must be a collaborative industry effort to attract more LPs and GPs to the Alliance. In fact, Alliance bylaws specify that there must be representation from GPs and LPs on the Board in order to promote the adoption of the standard. So, AltExchange is looking for members to help accomplish exactly that goal. Since the announcement, many inquiries to join the Alliance have been received. Having one hundred members by the end of this year would be a great achievement.

Everyone agrees this is something that is needed in the industry, and now it needs to be executed. For more information please visit www.altexchange.com.

The enhanced products demonstrate our commitment to all participants in the industry – from global, highly sophisticated firms, to more regionally-focused small and mid-size organizations.

The new version of our flagship software product, FrontInvest 8, includes enhancements spanning front office, portfolio management and fund management capabilities.

• Add-ins for Microsoft Outlook (FrontOutlook) and Excel (FrontExcel) enable data access between these popular applications and FrontInvest.
• Enhanced portfolio management capabilities include the standardization of valuation processes to increase transparency, the ability to manage hedge instruments and the ability to transfer data via a secure investee portal.
• Expanded back office capabilities include bank statement reconciliation,  invoice management and the ability to manage multiple accounting closings simultaneously.
• General partners and direct investors enjoy quick access to company and property data with new dynamic dashboards and the new Query Builder.
• The expanded set of standard reports saves organizations time and effort.

Additionally, the 100% web-based user interface has been modernized with support for more browsers and operating systems.

The updated Investment Café investor reporting platform provides fund managers and administrators with more control while enhancing their investor’s experience with more flexible user permissions, configurable login landing pages, file-specific links that can be accessed from third-party applications and more pre-built reports.

Enhancements to Pevara, the SaaS-based platform for investors to analyze their portfolio of private equity funds, include the accommodation of all ILPA-specified transaction types, custom weighted benchmark capabilities and the ability to monitor performance across funds in more detail.

The new release distinguishes our software products through cutting-edge design, depth of functionality and extensibility. Across my many years at eFront, our commitment has been to achieve technical superiority in our products, while supporting industry standards to simplify the sharing of information between parties and streamline our clients’ operations. We’ve achieved these goals with the latest release of our alternative investment and private equity software products while delivering tremendous benefit to our clients and users of our products around the world.

For more details, please click here, or contact an eFront representative.

The conference was an opportunity for the investment community to assess the changing economic and political landscape in southern Africa at a time when tremendous opportunities are emerging for private equity throughout the continent. These changes encompass all aspects of the environment for private equity investment, including convincing evidence of political stability, the emerging consumer and prospects for implementing a diverse array of infrastructure projects. SAVCA believes that private equity will play a vital role in sustaining and accelerating economic growth in the region.

Our keynote speaker was John Oliphant, Principal Officer at The Government Employees Pension Fund (GEPF), Africa’s largest pension fund. His address set the tone for the conference, reflecting a theme voiced by many conferees, that private equity is vital to Africa’s future development and economic growth. Oliphant presented a powerful argument for Africa as an excellent opportunity for substantial investment returns, which may be especially attractive to large pension funds in developed markets seeking higher returns.

Oliphant also pressed the case for local investing, insisting on a future where African capital is invested alongside capital from elsewhere in the world.

Many of the conference’s commentators concurred, expressing a strong belief that future funding for the continent—whether for private equity or otherwise—will come from the continent itself.

Another consensus view was the importance of investment in infrastructure projects under way across the continent. Investment in this sector will be critical to ensuring long-term growth and for capitalizing on the natural resource wealth in the region. The key infrastructure sectors discussed were energy, ICT (information, communication and technology), transportation, water and sanitation.

Private equity was also identified as an important tool in the implementation of ESG (environmental, social, and governance) initiatives, which ensure long-term sustainability of investments through political and social stability.

South African and southern African market conditions figured prominently in the conference discussions. A stable political and regulatory environment, coupled with a common language, makes South Africa an attractive target for investors. This gives the nation a distinct advantage in the private equity market and allows it to play the role of investment gateway to the continent.

Commentators warned that this advantage will not last forever, though, as changes in regulation arguably have been too slow to maximize the attractiveness of the region to foreign investors. Nevertheless, there was agreement amongst panelists  that regulation specific to the private equity industry, such as that in South Africa, should be welcomed, as it brings stability and credibility, which bode well for the long-term sustainability of the asset class.

Overall, the conversation at the private equity conference highlighted the opportunities for private equity throughout Africa, as well as the responsibility the industry has to support continued development and growth on the continent.

The headline regulatory issue for the year has to be the Alternative Investment Fund Managers Directive and the inexorable yet painfully slow process of transposition throughout the EU.  We continue to share the view that the Directive is unnecessary and will be bad for the private equity industry in general, but despite these concerns a wider discussion of the scope of the Directive as it relates to private equity is yet to materialise in the UK.

In the absence of the level 2 regulation and ESMA guidance that has been so eagerly awaited by everyone involved with the Directive and with the July 2013 deadline approaching, EU member states are starting the process of transposition using a ‘copy out’ approach. In the UK, the FSA has recently confirmed (in their consultation paper CP 12/32) that they too will be following this approach.

The danger for industry is that in the rush to transpose, some of the more fundamental issues are being ignored.

The most fundamental of these is the nature of an AIF. The definition of this set out in the Directive does not cover traditional private equity partnerships (see DP 12/1 response). This is because the AIF definition is based on the EU fund concept of an ‘undertaking for collective investment’, which ESMA explained has its roots in the UCITS Directive and requires the pooling of investor interests through the offering or placement of common units or shares. The fundamental difference between co-investment and pooled investment can be most easily understood when seen pictorially (click here for further details).

The consequences of moving from one model to another are unforeseeable internationally as we were reminded again by a law firm this week (read more).  This simply reinforces the attractiveness of non-EU platforms which are out-of-scope (read more).

Copy out transposition then fails to adequately deal with the issue of scope and from a legal perspective creates a very unsatisfactory position which can only be detrimental to the UK industry in particular. The current FSA consultation and the forthcoming FSA and Treasury consultations represent the last opportunity for industry to influence the UK legal position.

Interpretative arguments can always be pursued post transposition, but it would be bizarre if the FSA applied the Directive in accordance with its recitals and not what the implementing legislation actually said. The principles of Pepper (Inspector of Taxes) v Hart [1992] UKHL do not ordinarily extend that far. Whatever is finally decided, if problems with implementation are to be avoided, it is vital that the commercial/legal concepts of the Directive are applied logically in accordance with English law and the European rulebook (as found in MiFID and the Prospectus Directive as well as the Directive etc). The quality and integrity of English law should not be undermined by an assumption that gold-plating is somehow required. If there is a problem with the Directive, it should be the Commission that corrects it and not the UK authorities.

Building on our previous newsletter topics and the points set out above, this quarter’s newsletter contains a number of interesting articles highlighting just how problematic the Directive is in a traditional private equity context. We’d urge you to read and digest, ask questions and engage with the UK authorities before it’s too late.