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Lessons Learned - GP Implementation of the ILPA Template

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A candid Q&A with the PFA Solutions Co-Founder Richard Change about his first-hand experience implementing the ILPA Template for GPs with a few surprising hurdles and outcomes

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Lessons Learned - GP Implementation of the ILPA Template

  1. 1. January 2018 Lessons Learned: GP Implementations of the ILPA Template A candid Q&A with the PFA Solutions Co-Founder Richard Change about his first-hand experience implementing the ILPA Template for GPs with a few surprising hurdles and outcomes.
  2. 2. Adopting the ILPA Template, how hard is it, really? Richard, thank you for taking the time share your expertise and what has become your front row seat to this evolution in private equity reporting. First things first: I think LPs and GPs all want to better understand the task, how hard is it really for a GP to implement the Template? Great question and it’s one we are asked continuously. We’ve spent the last 18 months helping numerous GPs implement and automate the ILPA Reporting Template. At first glance the template is a bit daunting but most realize that the bulk of the data fields consist of metrics that they are already reporting on in their quarterly reporting. This is true for the vast number of fields in the template, however we typically caution clients to scroll down and look closer at the items “below the fold”. The template contains over 650 fields that need to be systematically mapped and extracted from source accounting systems. A good number of GPs rely upon two accounting systems, one for their limited partners and another for their internal management company. The template requires data from both systems in most scenarios because GPs typically maintain travel and expenses in their internal accounting system with charge backs to the fund in their limited partner or ‘fund accounting system’. Mapping these items over with the required specificity in the template takes planning and in some cases new accounting practices and/or data integration. What is the biggest hurdle to making it a push-button report? In your experience preparing GP systems to auto-populate the ILPA Template, what would you say is the primary hurdle you see for all GPs? The biggest hurdle we see is providing a reporting solution that works across multiple vintages of a GP's funds. Legacy funds may have used different accounting strategies for booking fees and expenses or different fund strategies may have utilized different approaches all together. Most of our effort is working to understand where these differences lie and helping devise accounting and reporting solutions that work for all possible scenarios. What are GPs saying about the ILPA Template? What is the GP feedback behind the scenes? I would assume that at first, they are more reluctant so I’m curious if their perspective changes once they are able to make it a regular part of their quarterly LP statement. You're correct in that some GPs are at first reluctant because there is a concern for how the information could be used in a negative manner which is understandable. However, I would say that overwhelmingly, GPs need a single standard that eliminates the many bespoke templates that they are currently having to prepare. The broad industry support for the ILPA Template provides this much needed relief with regard to investment cost and carry reporting. And, once implemented, the information provided to their investors via the ILPA Template fosters an open GP- LP conversation about investment costs and carried interest allocations which is far more constructive when they can be discussed in the context of returns. If you could offer advice to all GPs what would it be? What’s the one thing that all GPs need to know about (implementing) the ILPA Template? Look at the entire template first and then make an assessment as to which funds you’re able to systematically provide data for. Start by producing a trial balance that maps to the various fields and assessing where you may have gaps in your accounting and work to solve for those gaps prior to automating. Get legal involved early to assure that the information you’re reporting is consistent with your existing reporting materials and compliant with your investors' LPA. Furthermore, having legal involved from the start can also help with any footnotes that may need to accompany the template in the last section. A: Q: A: Q: Q: Q:
  3. 3. Lorelei Graye Independent consultant, speaker, author, and advisor to PFA Solutions, Lorelei was formerly a reporting officer for the SC Retirement System Investment Commission where she spearheaded the development and implementation of the annual fee collection, validation, and reporting process which was featured in a notable 2015 CEM Benchmarking study1. Ms. Graye has travelled extensively to educate and promote best practices such as the ILPA Template. With two decades of business experience, Lorelei holds a B.S. in finance and a B.A. in accounting summa cum laude. 1 Dang, Andrea CFA; Dupont, David CFA; and Mike Heale. “The Time Has Come for Standardized Total Cost Disclosure for Private Equity." Richard Change PFA Solutions co-founder and managing partner serves on the Board of the AltExchange Alliance and various industry committees. Prior to PFA Solutions, Richard was the Chief Architect at The Carlyle Group where he successfully implemented strategies that transformed and evolved mission critical systems while reducing overall spend and the total number of development resources. Richard holds a B.S. in Electrical Engineering from the Catholic University of America and a M.S. in Management of Information Technology from the University of Virginia, McIntire School of Commerce. About Us PFA Solutions With over 20 years of Private Equity and Financial Services industry experience, PFA Solutions brings technical expertise and deep business acumen to every problem we solve. Recent Highlights • ILPA Fee Reporting Template Automation • .NET Excel Add-In for executing Investran RW Reports • Custom Investran Active Template for allocating Sales • Investran 7.0 Business Events Development • Fund Performance Reporting – Mobile (Native iOS) • Salesforce.com to Investran Integration • AltExchange XML Data Standard Our technologists speak and understand your language so you don’t have to understand theirs. Whether in the front office or back office our solutions are scalable, maintainable and specific to your business needs.

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