Managing a private equity program is complicated. Not only do investors have to process the many documents their managers send them, but they also need to digitize the data points within those documents.
Clients of SEI Novus rely on their data team to not only organize all the documents their manager sends, but also extract the relevant pieces of information from each so that we can build a ledger or investment book of record and then build analytics on top of that.
For example, we can look at things like cumulative commitments, distributions, and paid-in capital at the total program level. We can break it down by strategies such as buyout or venture capital and we can go further to see individual funds and the extent to which we are committed or currently exposed to those managers. This is possible because we're looking at the paid-in capital, the distributions, and then through that derived metrics such as unfunded commitments and net cash flows. Net cash flows are also used to look at J curves or the extent to which funds are beginning to return more capital than you paid in. In this case, we're looking at the J curve for every single strategy within the private equity program. Once we understand fully the historical cash flows and we have a system for tracking them in the future, we can start to think about performance.
Within the private equity world .performance is measured in two ways. There are multiples, such as DPI, RVPI, and TVPI, which show the extent to which distributions have been made, residual value exists within a manager, and the combination of those through TVPI. We can also look at dollar-weighted returns such as IRRS and even make comparisons to public market equivalents by running an opportunity cost style analysis that shows what our returns would have been if we had invested in a more liquid index such as the S&P 500. This can be further broken down by categories such as strategy which we saw before or by vintage like you can see here. We can also isolate this by individual funds which allows us to see the extent to which funds have been able to return capital as well as the phase in their life cycle that they're at. If you're interested in learning more about how investors such as yourself organize their documents and extract insights from their data, click the link below to learn more.
