A: 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.
A: 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.
A: 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.
A: 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.