ANALYTICS
FINDINGS & INSIGHTS:
IMPROVING ANALYTICS: THESE THINGS TAKE TIME (AND INVESTMENT)
7 minute read time
KEY FINDINGS
79% of all surveyed firms have have improved their data mining and analysis capabilities in the last 12 months
52% of firms with an average target fund size over €1 billion say analytics will become much more important to their firm in the next three years
ANALYTICS
FINDINGS & INSIGHTS:
IMPROVING ANALYTICS: THESE THINGS TAKE TIME (AND INVESTMENT)
7 minute read time
KEY FINDINGS
79% of all surveyed firms have have improved their data mining and analysis capabilities in the last 12 months
52% of firms with an average target fund size over €1 billion say analytics will become much more important to their firm in the next three years
Despite the challenges associated with managing data, almost all respondents point to improvements in their use of analytics over the past 12 months—with more to come.
“To be a strong manager, you will need data and analytics,” says Tina Page, chief operating officer at private credit specialist MV Credit. “Technology is moving rapidly but private credit is generally slow on the uptake when it comes to systems. You just need to manage the best systems you can, because it’s all about reporting and your investment managers being able to make the right decisions from information they’re receiving in real time.”
Looking at where the improvements have taken place, 79% point to better data mining and analysis capabilities. Meanwhile, 64% have supported the development of data literacy and/or confidence in their organisation—underlining the fact that adopting analytics is as much about education and cultural change as it is about technology.
“Data literacy facilitates more confidence in teams,” confirms the managing director of a US-based firm with an average fund size less than €250 million. “There is an incredible amount of data that can be analysed, so we can make the most of available information.”
Improved data literacy paves the way for further deployment of data analytics. It could even act as an accelerator, making it progressively easier to add new and more sophisticated analytics functions.
“Visualising data is key in data literacy,” says Ahmed Khamassi, chief digitalisation officer at Stirling Square Capital Partners. “For example, we have built a data platform for portfolio reviews—rather than PDFs and spreadsheet printouts, we now look at proper graphs. People can understand the data and ask questions about trends and distributions. It’s a change in the way they think. The next step is forecasting. For users, adapting takes time but we’re getting there.
“People can interact easily with our new system and, once they do, they want to go further. We’ve given them tools to do their own analysis. It shows that people are willing to interact with the data—that’s already progress. People need to experience things before they know how to use them and get value from them.”
Around half of the respondents in our survey say they have added new capabilities over the past year. These include the implementation of predictive analytics (mentioned by 51% of respondents), the creation of purpose-built data assets (49%) and the deployment of self-service analytics (45%).
How have surveyed firms improved their use of analytics in the past 12 months?
have improved their data mining and analysis capabilities
have supported development of data literacy or confidence
have implemented predictive analytics
have created purpose-built data assets such as interactive visualisations
SOURCE: Aztec Group & Acuris Report – Differentiation Through Data (Nov. 2022)
Creating portfolio value through analytics
For some, improving analytics is also about working with their portfolio companies to increase value: “We’re actively engaged in our portfolio companies, and we partner with their management teams to help them grow,” says John Marsh, finance partner at Growth Capital Partners. “We share best practice and encourage the company to invest in its own systems. A lot of that is real-time reporting and getting actionable intelligence mid-month—seeing how trading is looking and whether you are on track for budget, and then making that information available to all the managers in the company.
“Most of the companies we invest in began in quite an entrepreneurial way. They haven’t always invested in systems before we came along. But that is often part of the value we can add. Improving the finance function, reporting and management information are an important part of professionalising the business—it helps growth and increases value.
“When it comes to data and analytics, it’s one-way traffic towards more tools and better information. The tools probably already exist, it’s just a question of adoption. The strongest-performing companies we’ve worked with have been ones that have better tools and a better view of the pipeline. These help them manage teams more efficiently and make sure that people are well utilised.”
"When it comes to data and analytics, it’s one-way traffic towards more tools and better information. The tools probably already exist, it’s just a question of adoption."
John Marsh – Finance Partner, Growth Capital Partners
The future of analytics in deal-making
Firms with the largest target fund sizes seem better prepared than smaller funds to race ahead—more than half (52%) of respondents with a target fund size above €1 billion expect analytics to be much more important to their firm in the next three years. This compares to 29% of firms with an average target fund size of €250 million-€500 million and just 25% of firms with a target fund size of less than €250 million.
Which analytics-driven investments will be a priority in the next three years? Two-thirds say machine learning/AI will be a top-three priority. Predictive analytics, meanwhile, is highlighted by half of respondents (although only 9% see this as their number-one priority).
Interestingly, our survey shows that data is seen as every bit as important as acquiring new technology when it comes to prioritising analytics investments. To put this in context, respondents most commonly point to quality of data (26%) as their number-one priority for analytics-driven investment.
“Quality of data will determine our progress in the next three years,” says the senior managing director and CFO of a US-based firm with an average target fund size between €250 million and €500 million. The firm also plans to invest in AI and predictive analytics.
Investing in data literacy is also seen as a priority in the coming three years, according to 41% of respondents, including 18% who give it top ranking.
As the CFO of a multi-asset US-based firm with an average target fund size of €250 million-€500 million points out, “We want to invest in talent training and management. Analytics results will be better when employees are aware of how to use data optimally.”
In most cases, respondents are looking to mix and match a range of different analytics-related capabilities.
Data lakes are among the analytics-related technologies that garner a relatively low score, cited by only 29% of respondents. This is somewhat surprising given concerns many respondents express about managing unstructured data—one of the main benefits of using data lakes is the ability to streamline the management of large and often chaotic datasets. Asset tokenisation also receives a low score and is cited by only 5% of respondents overall. This suggests that blockchain-based technologies have still to prove their worth, at least in the context of private markets.
“Our analytics-driven investments include data platforms, AI and asset management solutions because of the practical value-add to our business,” says a Czech Republic-based respondent from a PE firm with an average target fund size of less than €250 million. “We also need data lakes because of the large amount of data that comes through our systems.”
What proportion of respondents see analytics becoming much more important to their firm in the next three years?
SOURCE: Aztec Group & Acuris Report – Differentiation Through Data (Nov. 2022)
Average target fund size €1bn +
Average target fund size €500m – €1bn
Average target fund size €250m – €500m
Average target fund size <€250m
Build a data-driven mindset
Turning to the obstacles that need to be addressed in implementing an analytics-driven strategy, lack of a data-driven mindset tops the list for 45% of respondents.
On a more positive note, a much smaller proportion (11%) points to cultural challenges as a blocker, suggesting that most respondents are open to change. This extends to clients, with only 8% of respondents citing lack of client demand/client resistance as an obstacle to implementing an effective analytics-driven strategy.
Perhaps predictably, lack of funding is seen as an obstacle by a significant proportion of respondents (44%), followed by integration difficulties with legacy IT (42%) and a lack of high-quality and accessible data (39%).
In line with our earlier findings, cybersecurity attracts a relatively low ranking as an obstacle in general (according to 18% of respondents overall and only 6% ranking it as their main obstacle). Those that do mention cyber frequently point to the reputational impacts of things like data breaches.
As the partner of a US-based infrastructure fund with an average target fund size exceeding €1 billion points out, “In the case of a data breach, stakeholders will not trust the organisation.”
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