Tag Archives: Portfolio Management

Introduction

Portfolio Management in the context of private equity (PE) involves the active management and oversight of a collection of investments in privately held companies. Private equity firms raise funds from investors, such as institutional investors, pension funds, and high-net-worth individuals, and use these funds to acquire ownership stakes in companies with the goal of enhancing their value and ultimately generating attractive returns.

Portfolio Management in the context of venture capital (VC) involves the active management and oversight of a collection of investments in early-stage startups and emerging companies with high growth potential. Venture capital firms provide funding, mentorship, and strategic guidance to these startups to help them scale and succeed.

Overall, it involves overseeing and optimizing a collection of investments in privately held companies. The goals of portfolio management in these fields differ from traditional asset management due to the unique characteristics of private investments.

How Portfolio Management works in Venture Capital

Investment Thesis and Focus:

Venture capital firms define their investment thesis, which outlines the types of startups they are interested in funding. This includes the industries, technologies, and business models that align with the firm’s expertise and strategic goals.

Deal Sourcing and Screening in Portfolio Management

Portfolio managers actively seek out investment opportunities by sourcing deals through networks, referrals, pitch events, accelerator programs, and other channels. Startups are screened based on their market potential, innovative solutions, founding team, and growth trajectory.

Investment Decision

After evaluating potential investments, portfolio managers decide which startups to fund. This decision involves assessing the startup’s business plan, market opportunity, competitive landscape, and scalability.

Investment Terms and Negotiation:

Portfolio managers negotiate the terms of investment, including the equity stake the VC firm will receive in the startup, the investment amount, and any additional rights or preferences.

Value Addition and Mentorship:

Venture capital firms provide more than just capital; they offer mentorship, guidance, and strategic support to help startups navigate challenges and accelerate growth. Portfolio managers might assist with product development, market entry, business development, and talent acquisition.

Follow-on Investments:

Successful startups often require multiple rounds of funding as they grow. Portfolio managers decide whether to participate in follow-on investment rounds to maintain their ownership stake and support the startup’s continued growth.

Exit Strategy in Portfolio Management

Venture capital firms plan exit strategies to realize returns on their investments. Exits can occur through acquisition by larger companies, mergers, or initial public offerings (IPOs).

Risk Management in Portfolio Management

Startups inherently carry a high level of risk, and portfolio managers assess and manage these risks by closely monitoring the startups’ progress, addressing challenges, and making adjustments as needed.

Performance Monitoring and Reporting:

Portfolio managers continuously monitor the financial and operational performance of their portfolio companies and provide regular updates to their investors.

Fundraising and Investment Strategy:

Private equity firms raise funds from investors, creating a pool of capital known as a private equity fund.

The firm outlines its investment strategy, which includes the types of companies it intends to invest in, the industries it will focus on, the geographic regions of interest, and the anticipated investment timeline.

How Portfolio Management works in Private Equity

Deal Sourcing and Due Diligence:

Portfolio managers actively seek out investment opportunities by sourcing deals through various channels, including networking, industry connections, and proprietary research. Due diligence is conducted to thoroughly assess the target company’s financials, operations, market position, competitive landscape, growth prospects, and potential risks.

Investment Decision of Portfolio Management

Based on the findings of due diligence, portfolio managers decide whether to invest in the target company and negotiate the terms of the investment, including the purchase price, equity stake, and governance structure.

Value Creation:

After acquiring a company, private equity firms work closely with the company’s management team to implement strategic initiatives aimed at improving operations, increasing efficiency, expanding market share, and driving growth.

Streamlining operations, entering new markets, introducing new products or services, and optimising the capital structure are all examples of value creation strategies.

Active Ownership and Operational Involvement:

Private equity portfolio managers take an active role in the companies they invest in. They might appoint board members, provide strategic guidance, and leverage their industry expertise to help the company succeed.

Exit Strategy:

Portfolio managers develop an exit strategy to realize returns for the fund’s investors. This could involve selling the company to a strategic buyer, merging with another company, or taking the company public through an IPO.

Portfolio Diversification:

Private equity firms manage a diversified portfolio of investments to mitigate risk. They may invest in companies across different industries, geographies, and stages of development.

Risk Management:

Portfolio managers assess and manage risks associated with each investment, including industry-specific risks, regulatory changes, macroeconomic factors, and competitive pressures.

Performance Monitoring and Reporting:

Private equity firms closely monitor the financial and operational performance of their portfolio companies on an ongoing basis.

Regular reporting to investors provides transparency into the performance of the fund’s investments.

Distribution of Returns:

As portfolio companies achieve milestones and are eventually sold or exit the investment, the private equity firm distributes returns to its investors based on the terms of the fund.

Challenges in Portfolio Management

Following are the challenges in Portfolio Management:

Challenges in Portfolio Management

Value Creation:

Private equity portfolio managers need to implement effective value creation strategies within portfolio companies to enhance their performance and increase their value. Achieving operational improvements, strategic growth, and cost optimization can be challenging.

Exit Timing and Strategy:

Identifying the right time and strategy for exiting an investment is crucial. Economic conditions, market dynamics, and company-specific factors can all impact the success of an exit strategy.

Due Diligence Complexity of Portfolio Management

Conducting thorough due diligence on potential investment targets can be complex and time-consuming. Ensuring accurate financial information, evaluating operational risks, and assessing the quality of the management team are critical.

Management Team Alignment:

Aligning the goals and strategies of the private equity firm with the existing management team of the portfolio company can be challenging. Differences in management styles and objectives can hinder successful value creation.

Cyclical Industry Exposure:

Private equity investments can be exposed to specific industry cycles, economic downturns, and regulatory changes. Portfolio managers need to manage risk by diversifying across industries and adapting to changing market conditions.

Capital Allocation:

Allocating capital efficiently across a diverse portfolio of investments while maintaining a balance between risk and return can be a complex task.

Venture Capital

Following are the challenges faced by the venture capital firms:

Early-Stage Risk:

Venture capital investments are made in startups with high growth potential, but they also carry a significant level of risk. Many startups fail to reach profitability, making the success rate of investments uncertain.

Valuation Challenges:

Valuing early-stage startups can be challenging due to limited financial history and market comparable. Over- or undervaluing startups can impact the returns generated from the investments.

Exit Challenges:

The time and method of exit for venture capital investments can be uncertain. The IPO market may not always be favourable, and finding suitable acquisition opportunities can be difficult.

Portfolio Diversification:

Investing in startups requires diversification to mitigate risk, but building a diversified portfolio of early-stage companies can be resource-intensive and may require a large number of investments.

Information Asymmetry:

Gathering accurate and timely information from startups can be challenging, especially when startups are focused on growth and may not have standardized reporting.

Regulatory and Legal Complexity:

Startups often operate in industries with evolving regulatory landscapes, requiring portfolio managers to navigate legal and compliance challenges.

Magistral’s Services on Portfolio Management

Magistral provides portfolio management services for numerous kinds of businesses such as portfolios for venture capital and private equity funds. It is a hassle for all the investors who serve on numerous boards to apply what works in one portfolio business to another. When all businesses are in related industries and are contending with very comparable challenges, the issue becomes more serious. The lack of resources across companies, the short amount of time that board members may spend supervising, and the concentration of implementation expertise in a single portfolio company all work against board members.

Portfolio Management for VCs

We assist portfolio managers in consolidating their Marketing (mostly digital), Strategy (fund-raising and exits), and Finance at a fraction of the expense necessary to have specific duties in each portfolio firm, no matter how big or little. The off-shored extended team also makes sure that no information is lost for projects that are comparable across firms, and that several projects in different organizations can run simultaneously, prioritized by the calendar of board meetings.

Our service packages for Portfolio Management include:

Collecting Data– Collecting portfolio Data weekly/ monthly/ quarterly as per the client requirements.

Financial Models- Preparing various types of financials models, financial statements and cash positions.

Data visualization- Creating dashboards in consistent formats across portfolio companies.

Review Meeting- Attending review meetings and prepare actionable notes.

Audits- First level audit of the data collected to ensure the quality and reliability of the data.

About Magistral Consulting

Magistral Consulting has helped multiple funds and companies in outsourcing operations activities. It has service offerings for Private Equity, Venture Capital, Family Offices, Investment Banks, Asset Managers, Hedge Funds, Financial Consultants, Real Estate, REITs, RE funds, Corporates, and Portfolio companies. Its functional expertise is around Deal origination, Deal Execution, Due Diligence, Financial Modelling, Portfolio Management, and Equity Research.

For setting up an appointment with a Magistral representative: visit www.magistralconsulting.com/contact

About the Author

The article is authored by the Marketing Department of Magistral Consulting. For any business inquiries, you can reach out to prabhash.choudhary@magistralconsulting.com

Introduction

Portfolio Management for Private Equity and Venture Capital firms refers to the way in which the critical performance metrics are collected, measured, monitored, and tracked across the portfolio companies, and/or the active funds. Furthermore, such measures ensure that the capital is not subjected to excessive market risk. The capacity to make informed decisions underpins the entire process. Generally, Private Equity firms seek out underperforming or undervalued companies. By working with these companies, managers unlock significant value by:

– Improving business strategy

– Injecting managerial expertise

– Advance product technology

– Expanding distribution

Portfolio Management for Private Equity involves acquiring investment company ideas from a variety of sources and evaluating these to make an analytical decision. It is critical to rethink the portfolio regularly and practice the continual development of Portfolio Management methods.

Effective Portfolio Management for Private Equity leads to better IRRs for LP Investors

A PE or a VC firm invests in a company typically with 5+ years of the horizon. In early-stage investing, active management of companies to grow the valuation is imperative.

Even for late-stage investing, a well-balanced portfolio is critical in today’s world, as the perfect set of companies in a portfolio of private equity helps to grow. A good portfolio is a well-balanced combination of various companies, with funds allocated according to the firm’s tastes and risk tolerance. Building a portfolio is only the beginning of the task. In terms of returns and risk reduction, active management outperforms passive management.

Portfolio management is crucial because it reduces risk by diversifying and redistributing cash across different companies in the portfolio based on their performance. It also aids in the preparation of tax requirements. It also aids in the organization of money in times of need.

Factors affecting Portfolio Management for Private Equity

Private equity is undoubtedly a very competitive industry. It has been traditionally known for cutthroat business focused on cost-cutting and profit generation. This trend has slowly shifted in recent years. Now, Private equity looks for such companies in their portfolio which generate value over the long term.

Factors that impact PE Portfolio Performance

Crucial Factors leading to the success of a PE portfolio

Some of the factors which are taken into consideration in Private Equity portfolio management are:

Market Competitiveness and a Company’s Positioning

The market’s competitiveness will significantly impact an individual company’s ability to achieve long-term success. A market with much competition offering identical items is likely to be less profitable.

Growth Potential

Private equity firms are increasingly talking about companies where they would infuse both financial and organizational capabilities and industries that can accomplish growth in numerous ways.

Value Creation Potential

The companies that operate in markets with untapped value creation potential are more attractive. Private equity firms prize the ability to minimize costs and increase existing capabilities for new revenue streams.

Low CAPEX

If a company operates in a sector that will necessitate a significant amount of initial funding, a private equity firm will view this as an obstacle and will want to spend less for the company. In contrast, if a company already has the capital it needs to perform business and expand, a private equity firm would be willing to pay a higher price for the acquisition.

Regulatory Obstacles and Costs

Regulatory barriers and costs could significantly impact the price of a company that operates in a particular sector. When making a bid to add a company to a portfolio, private equity firms recognize higher tax burdens.

Industry’s Most Recent Trends

The latest industry trends and possibilities for expansion have a significant impact on a company’s valuation. Companies that compete in the market can be more desired from private equity firms’ standpoint if the industry is predicted to proliferate, is considered particularly innovative, or needs a specific technological capacity that is hard to acquire.

Improving Private Equity Portfolio Performance

Effective project delivery and the ability to make modifications are key to improving portfolio success. It cannot be expected that projects that have been approved will produce the intended outcomes. Their worth, risk, and cost must all be assessed regularly. Projects should be discontinued or replaced if underperforming and have better alternatives.

Data analysis should be considered when making decisions. It is critical to collect ideas both internally and externally and choose the correct initiatives based on standards and statistics. Projects must be effectively managed. Methods, processes, and competencies for the project and program management must be improved, while clarity in project performance and risk need to be encouraged.

Improving PE Portfolio Performance

Portfolio Management is a continual activity, not simply an annual event, so planning should be done more frequently. The cost, risk, benefits, and coherence of authorized projects should all be reevaluated, with higher-value or lower-risk alternatives being considered

Technology’s Role in Enhancing Portfolio Performance

Better technology ensures that data from other processes, such as project, resource, and economic management, is timely and accurate. It also allows for the detection of underperforming projects and reduces effort and time spent on portfolio management tasks, allowing for continuous planning. It enables speedier re-planning when budgets alter, or new projects are made mandatory by providing analytic support in considering numerous ideas and projects simultaneously. It also gives process participants, stakeholders, and constituents access to reporting and transparency.

Role of Outsourcing

Outsourcing is the practice of hiring a third-party organization to carry out services that were initially performed in-house. The shift towards a customer-oriented business model resulted in outsourcing and therefore it became an important part of business economics in the 1990s. In only a few decades businesses realized in order to stay relevant in the industry, they need to focus on increasing the customer value of their services or products. Since then, businesses turned more towards the concept of outsourcing.

Outsourcing is even more critical for PE acquired businesses as they need to create value and savings quickly due to their investors’ pressure.

Here are a few fundamental benefits of outsourcing:

– Reduced costs are one of the primary advantages of outsourcing. These costs only arise when the process is ongoing, when these processes are not required, no bills are generated.

– Outsourcing partners are experts in their domain; therefore, they are quick and efficient in the organization’s process.

– Their expertise leads to increase quality and better results. They deal with the specific task with a matter of routine and precision.

Experienced outsourcing vendors provide cost savings with expertise, therefore it’s a better return on the company’s investment.

Magistral Service Offerings for Portfolio Management for Private Equity and Venture Capital

Magistral has helped multiple Private Equity and Venture Capital firms in managing their portfolio in the cycle of acquisition, value creation, and securing a profitable exit. Expertise when combined with Outsourcing brings quality and cost-effectiveness to the strategic decisions made at the portfolio companies.

Magistral's Portfolio Management Service Offerings for Private Equity and Venture Capital

Magistral’s Service Offerings for Portfolio Management for Private Equity and Venture Capital

So here is how Magistral helps:

Strategy

This is the most important part of the planning, which comprises the following:

– Identifying Add-On Acquisitions and Potential Buyers: Finding relevant M&A opportunities help in lowering the cost by merging the staff members with similar expertise, expanding into new regions, consolidating management and finances, and boosting the buying power.

– Planning Fund Raising Strategies: Here, a basic setup is made for fundraising such as LP research, LP reach out through calls & e-mails, preparing content, partner profiles, etc.

– Exit Strategy: Various exit strategies are made including a trade sale, which is the sale of a company to another PE firm, or a secondary buy-out for a medium or large portfolio company.

– Market Growth Strategy: Profitability, Growth, and Performance are the major objectives for Portfolio Management for Private Equity. Various strategies are formed to keep the portfolio growing.

– Content Marketing: This step helps in marketing the content for the acquisition of add-ons or potential buyers for private equity.

Analytics

The second major step involves analytics of portfolio management for Private Equity and Venture Capital. Analytics include the followings:

– Financial Reporting and Analysis: It is the process of documenting and communicating financial activities and performances over specific time periods. It depicts the financial health of the companies. This can be further done by performing trend analysis, common-size financial analysis, financial ratio analysis, and benchmark (industry) analysis.

– Preparing Dashboards: Various dashboards are prepared by cleaning the data, selecting the right chart, and building the perspective using predefined templates which helps in making a clear and better decision.

– Data Visualization: Information or data is then represented by visual elements like charts, graphs, and maps. It’s the most accessible way to see and understand trends, outliners, and patterns.

– Text Cleaning and Mining: Text cleaning and mining refer to artificial intelligence technology that uses natural language processing to transform the free text in documents and data into normalized structure data suitable for analysis.

– Predictive Modeling: It is a statistical technique using machine learning and data mining to predict and forecast likely future outcomes with the aid of historical and existing data. It works by analyzing current and historical data and projecting what it learns on a model generated to forecast likely outcomes.

– KPI Tracking: Key Performance Indicator (KPI) helps in monitoring performance metrics.

– Web Scraping: It’s the process of using bots to extract content and data from a website.

Sales

After analytics, the sale is taken care of by performing the following activities:

– List Generation: Final list is generated on the basis of various factors.

– CRM Cleansing and Management: It is performed to improve the overall quality of our data so that it increases the overall productivity of the portfolio.

– Competitive Intelligence: Competitive Intelligence research is the data gathered to know and analyze competitors. It helps in making better strategic decisions.

– Social Media Management: It helps in promoting the sales of a particular portfolio by the means of social media.

Financial Planning

Financial Planning while portfolio management for private equity is an important step as it helps in developing overall goals and creates a plan of action to achieve them. This step majorly includes the following:

– Budget Preparation: It’s a process of preparing an outline of planned future activities by making available funds, expenses, and future incomes into account.

– Forecasting: Historical data are used as inputs to make informed estimates that are predictive in determining the direction of future trends

– Competitive Quarterly Earning Updates: Final step is to make competitive earning updates.

Procurement

Its purpose is to develop a fully comprehensive picture of procurement. Following are the steps performed:

– Spend Analysis: In this, we analyze the past and projected procurement expenditure or spending for services or work

– Vendor Identification: In this, business requirements are identified and analyzed, and then developed to finally evaluate the vendors

– Spend Base Cost Reduction: This is performed to systematically boost productivity

– Category Strategy: It is an excellent tool that should be the procurement team’s work. It maximizes the value and efficiency

– RFP Support: RFP stands for Request for Proposal, it’s a business document that announces a project, describes it, and solicits bids from qualified investors

Typical Outcomes of our Portfolio Management Services

– 30-50% reduction in cost operations

– Up to 20% improvement in sales for companies operating in B2B segments

– Up to 20% reduction in Procurement spend base

– Up to 10% improvements in gross margins due to advanced analytics

– 30-40% improvement in plan compliance

About Magistral consulting

Magistral Consulting has helped multiple funds and companies in outsourcing operations activities. It has service offerings for Private Equity, Venture Capital, Family Offices, Investment Banks, Asset Managers, Hedge Funds, Financial Consultants, Real Estate, REITs, RE funds, Corporates and Portfolio companies. Its functional expertise is around Deal origination, Deal Execution, Due Diligence, Financial Modeling, Portfolio Management and Equity Research.

For setting up an appointment with a Magistral representative visit www.magistralconsulting.com/contact

About the Author

The article is Authored by the Marketing Department of Magistral Consulting. For any business inquiries, you could reach out to prabhash.choudhary@magistralconsulting.com

Introduction- What is Portfolio Management?

Portfolio Management Services are the services that keep a portfolio of investments healthy and prime them to produce expected returns on investments.

Sometimes portfolio management is passive, where it mostly deals with analyzing the assets and its performance. In some cases, portfolio management is quite active, where the manager is expected to get into the operations of the invested company and make sure its operational aspects are fine-tuned so that the asset enhances its intrinsic value

Whatever is the underlying nature of the portfolio, portfolio management concerns about managing the asset properly and prepare it to give superlative returns for the investors

What constitutes a Portfolio?

A portfolio has a different meaning for different institutional investors. A Venture Capital or a Private Equity firm may mean invested companies as its portfolio. These companies can vary in size. Sometimes they are start-ups or smaller companies, whereas some other times they could be multibillion-dollar enterprises with businesses in many countries. These companies could be public or private

A Hedge Fund calls the stocks where it has invested as its portfolio. These are publicly traded stocks and trade on global exchanges.

A Fund of Funds will call its underlying Hedge Funds as its portfolio. A Fund of Funds invests in funds like Hedge Funds. So all the hedge funds where it decides to park the money are its portfolio

A Real Estate fund will call its Real Estate investment as its portfolio. Various funds specialize in multiple RE asset classes like residential, commercial, infrastructure, and multiple other versions of it therein.

An Investment Bank or a Commercial Bank may have different asset classes, depending on its business model and clientele, calling an underlying asset as the portfolio. They can be Real Estate, Real Estate Classes, Cryptocurrencies, Commodities, and anything else that generates a return and is invested with an aim of either generating returns or appreciation in capital value.

Depending on the underlying asset, the portfolio management approach takes different paths

Portfolio Management for Private Equity and Venture Capital

When Portfolio Management is talked about for Private Equity or Venture Capital firms, it means helping the portfolio of companies, mostly private, in appreciating its valuation. This appreciation in value comes from improving revenue or cutting costs. The ultimate aim of investing in companies by Private Equity or Venture Capital firm is to exit at a valuation that is multiple times over the initial investment. A significant part of the fund is in the portfolio management business.

Multiple things could be done to make sure the portfolio company grows its revenue and keeps its costs in control

Outsourcing some of these services produce multiple benefits like reduction in operations’ cost, improvement in quality, etc.

Here are the services and all of it could be effectively outsourced in the portfolio management process to further net in the cost savings:

All the elements of companies’ portfolio management that could be outsourced

Business Research

Business Research touches multiple aspects of operations for a small company. It plays a vital role in Finance, Sales, Marketing, Strategy, and Procurement. Almost all research tasks in these functions could be outsourced. Investors taking in hands the research function take the nerve cells of the organization in control. From there, the company could be managed more closely and with better control. One of the most important aspects of business research is fine-tuning the business strategy. Investors can devise the expansion plans and study whether they are on track.

Marketing

Marketing and specifically the elements of Digital marketing could be outsourced well. Components of digital marketing like content marketing, web design, social media advertising, SEO, and everything else related could be outsourced and outsourced well. Marketing is the most important lever when it comes to growing the business of a small company aggressively. Topline growth increases the valuation of the company almost simultaneously.

Business Development

Specifically, for B2B businesses in the portfolio, there are multiple outsourceable elements for business development. This includes list and lead generation to onboard newer accounts faster. Also, account-based management is important for bigger clients of a smaller portfolio company.

Mergers and Acquisition

After the initial investment, the struggle for the investor takes another direction. It is to raise further rounds of fund-raising or start finding a bigger buyer for the company. Multiple activities are spanned out of this objective. For example, generating the list of potential buyers or investors and all the accompanying documents that go towards an M&A exercise.

Fund-Raising

Fund Raising is an ongoing cause for venture-funded companies. After the seed round, the preparations start for a further round of fund-raise like Series A, Series B, Series C, and so on. This leads to a continued quest for generating a pipeline of investors for further rounds of fund-raising. This activity of generating and populating pipeline could be effectively outsourced while the management focuses on revenue and profitability

Outsourced CFO

A full-time CFO is something that a small start-up may struggle to have. When a VC fund invests in multiple start-ups, it could have a centrally located CFO for all these companies. To further save costs, this CFO or parts of the CFO team could be outsourced. An outsourced CFO brings in the expertise of a tenured CFO along with the scalability of an outsourced team.

Product Design and Development

Many investments specifically in the VC space happens in the pre-product development stage or immediately after the proof of concept still leaving the product with some problems that need to be ironed out. This is when product design and development services come into play. It helps in setting up websites, making apps, and initial marketing to gain the users and change the UI or business strategy if required. It’s just that with outsourcing, these business and technical iterations become a lot cheaper.

Lead and List Generation

An ongoing company needs a list-building exercise all the time whether it’s about getting a new client or an investor or a vendor or anyone else for any other type of business collaboration.

Portfolio Management for Hedge Funds, Investment Banks and other Asset Managers

This section is for anyone else who is not dealing with investing in private companies. This is also for anyone who does not get into an active management role in a company’s day to day affairs. The underlying assets in this portfolio could range from Real Estate and all its classes like residential, commercial, land, buildings, infrastructure, etc., cryptocurrencies, public company stocks, commodities, and everything else that is bought, sold, or traded for capital appreciation or returns. Portfolio Management strategies, in this case, differ significantly from explained earlier and here different tools and models are used for Portfolio Management

Here are the aspects of such a portfolio management project that could be outsourced effectively

Activities that could be outsourced for Portfolio Management of funds and other assets

NAV Tracking

Almost all types of assets need regular NAV tracking. NAV which stands for Net Asset Value is the underlying value of the asset that changes from time to time. All the changes need capturing for investor communication periodically. NAV of some assets is easy to capture, whereas with other assets it follows a difficult process. Portfolio Management and Investment Analysis are connected as the successful investing strategy need to be doubled down on. Several KPIs for Portfolio Management are tracked as well.

Investor Relations

Investors need to be reached out for all the information like the value of their holdings, taxes, fund management fees, waterfalls, etc. Sometimes they would also need a primer on the strategy of the fund or change in the plans by the fund manager. A Portfolio Management dashboard is often prepared and is automated for the information of investors

Middle Office

All the middle office activities like fund administration could be effectively outsourced. This form majority of research, and analytics jobs performed at a Fund. Automated tools for portfolio management is used here.

Back Office

All the tasks like book-keeping could be outsourced at a fraction of the cost. There are multiple software for portfolio management and book-keeping that could be used in the process

Marketing

Most marketing activities like CRM, Marketing communications, reports, and content could be outsourced as well.

Why outsource portfolio management?

Outsourcing has multiple benefits for a Portfolio Management Office. Cost-saving is an obvious one. Here are the factors that add to the charm of an outsourced deal:

Cost: Cost savings of 30-70% from outsourcing portfolio management is very typical. The cost that you save depend on the geography from where you want to outsource and the technical skills required to do the job effectively

Skill inventory: Many small fund management teams operate at a suboptimal level and are not able to meet the standards of bigger funds as their support services don’t match up with that of much bigger funds. Outsourcing presents an opportunity for smaller fund teams for skill enhancements. Outsourcing brings the skills to the team without permanent hiring

Quality: The work quality that is outsourced is of global standards and helps raise the bar for the internal team as well

Risk: Outsourcing reduces the portfolio management risk significantly

Flexibility: A Portfolio Management Analyst can either be hired full-time offshore or in parts or services can be availed on an hourly basis

Magistral has helped multiple fund managers in outsourcing portfolio management and other aspects of operations.

About Magistral

Magistral Consulting has helped multiple funds and companies in outsourcing CIO related activities. It has service offerings for Private Equity, Venture Capital, Family Offices, Investment Banks, Asset Managers, Hedge Funds, Financial Consultants, Real Estate, REITs, RE funds, Corporates and Portfolio companies. Its functional expertise is around Deal origination, Deal Execution, Due Diligence, Financial Modeling, Portfolio Management and Equity Research

For setting up an appointment with a Magistral representative visit www.magistralconsulting.com/contact

About the Author

The Author, Prabhash Choudhary is the CEO of Magistral Consulting and can be reached at Prabhash.choudhary@magistralconsutling.com for any queries or business inquiries.