Unlocking Private Credit Insights: How Advanced Modelling Tools Drive Success

Private credit’s rapid growth, with AUM set to double to $2.7 trn by 2026, has established it as a distinctive and compelling option within the realm of alternative investment strategies Offering investors the prospect of steady returns and diversification half of Limited Partners (LPs) plan to increase commitments to credit. However, the intricate nature of private credit investments presents challenges when it comes to tracking performance, generating insightful reports, and meeting the evolving demands of LPs.

The Legacy Tool Conundrum

For many private credit funds, the cornerstone of track record and performance reporting has been the ever-present Excel. While Excel offers flexibility and familiarity, it is ill-equipped to handle the complexity and volume of data that private credit investments generate. Manual data entry, formula errors, and the sheer time investment required to create comprehensive reports are all too common pitfalls, further compounded by the inherent “key person risk” associated with relying on Excel. The departure of a knowledgeable employee can disrupt reporting processes and jeopardise data integrity, adding another layer of complexity to the already challenging task of performance tracking and investor communication.

Furthermore, as funds grow and investments become more complex, Excel struggles to keep up. It cannot provide the in-depth analysis and detailed information that investors require. Comparing performance across various vintages, visualizing portfolio trends, and generating detailed attribution reports become Herculean tasks.

Advanced Modelling Tools: A Path to Efficiency and Insight

In the face of these challenges, a new generation of advanced modelling tools has gained widespread use across alternates, promising to transform the way private credit funds manage their data and reporting processes. Modern modelling tools such as Anaplan and Pigment streamline data handling and analysis, empowering private credit funds to construct complex models, perform robust scenario planning, and generate insightful reports with ease, these lead to:

Automation and Data Integration:  Streamlined data collection and calculation processes, minimize manual errors, freeing up valuable time for in-depth analysis and strategic decision-making. Data required for performance reporting is often sourced from multiple admins, manual data extracts and other source systems. This is challenging to compile and align data, front loading effort in order to commence analysis. Being able to cut this time and effort whilst creating data quality checks and ETL processes saves time and improves confidence.

  Robust Analytics and Visualization: The large volume of transactions and complexity of calculations such as IRR put a strain on excel and other legacy tools. As a result analytics and visualizations are delinked and calculation refreshes takes minutes if not hours. Using Cloud based modelling tools, calculations refresh in real time updating charts, KPIs and reports instantly for all users. This also allows concurrent use for global teams with a single source of truth and without the risk of files crashing.

Transparency and Confidence:  Generate reports that offer unprecedented transparency into underlying data. Allowing a deep dive into performance drivers,  and fine-tuning investment strategy with granular insights that inspire confidence among investors. Allowing the creation of IRR attribution and bridges, managers are able to understand the impact of wider market factors on portfolio and uncover true investment performance, for example provided performance inclusive and exclusive of FX, hedging, leverage or any combination of these.

Self Service Reporting: Allow team members to generate insights without relying on specialized technical expertise, leading to better informed and aligned decisions. Users have remarked that with little training and no technical knowledge they are able to easily reply to data requests with their own filters and report characteristics, without the lead time of requesting model owners to update or create additional analysis. An example would be a fund no longer investing in China and so wishing to exclude their historic performance for the next round of fundraising, users can generate this and views in seconds across any number of attributes such as vintage, geography, sector and sponsor.

Case Study

A large multinational credit investor, managing over 25 active funds and SMAs across five strategies, faced significant challenges in their quarterly track record reporting. The Excel-based process in place was heavily manual, relying on data from multiple fund administrators and plagued by data inconsistencies and errors. The majority of their effort was consumed by cleaning and verifying cash flow data, often necessitating non-auditable manual adjustments. To compound these issues, macros frequently broke down during data consolidation, hindering the production of comprehensive asset, leveraged, and whole portfolio reports.

The adoption of a cloud-based advanced modelling tool revolutionised their process. Data ingestion was standardized, and adjustments and corrections were meticulously tracked, significantly reducing manual intervention and the time devoted to preparing underlying cashflows.

This enhanced granularity facilitated the production of gross-net bridge reporting, attribution grouping and reporting, and self-service, user-defined reports. This empowered the investor relations team to provide prompt and comprehensive responses to investor queries, enhancing overall efficiency.

Embracing the Future: A Competitive Advantage

As the private credit industry becomes increasingly competitive, the ability to efficiently manage data, generate insightful reports, and communicate effectively with investors is essential. Funds that cling to legacy tools like Excel risk falling behind. Embracing advanced modelling solutions is not simply a matter of efficiency; it’s a strategic decision that can enhance investor relations, streamline operations, and ultimately drive success.

Don’t let outdated reporting methods hold you back.  Embrace the future of private credit with and gain a competitive edge in the market. Contact us today to learn more.