The technology landscape for portfolio monitoring and fund valuation is constantly evolving. No surprise, as the major Fintech players in the space were all founded in the last 10-15 years. The systems are impressive, the funding is abundant, and AI-enabled workflows are making fund processes more efficient.
The tech is here, and it’s improving every day. Valuation frequencies are increasing, regulatory scrutiny is increasing, and retail capital is entering the private markets at a rapid pace. Internal fund processes must keep up.
Our clients consistently explore improvements to their portfolio monitoring and valuation processes as teams are collecting data and valuing positions faster than ever before. No matter the fund size, the conversation is happening across small-cap, middle market, and mega funds.
Firms are motivated to improve, so what is the real reason why tech implementations stall out or fail to launch?
The technology is not the constraint
The constraint is a poorly defined operating model; the blueprint that defines how a firm structures its people, processes, technology, and governance. It sounds like common sense, but in our experience, it is the most typical cause of implementation roadblocks.
The tools in this space can process a valuation in minutes and roll-forwards can generally be automated using public market data without waiting for new PortCo metrics. All eyes are on the technology, but it’s the people that are responsible for guiding the technology. Without following a well-defined operating flow, the new process runs parallel to the old process, reviewers don’t trust the outputs, and the team reverts to sprawling spreadsheets at the next quarter-end (or month-end).
Valuation frequencies are increasing
Now, more than ever, properly defined roles and responsibilities are necessary to keep up with the increasing pace of valuation marks. Quarterly valuations are still prevalent, but monthly valuations are becoming the norm for majority or controlling positions, with talks of weekly and daily valuations for more liquid vehicles.
Monthly valuations provide smoother walks throughout the year, but this cadence compresses and intensifies the process. A quarterly cycle leaves room to handle inefficiencies: time to chase PortCo financials and reconcile data. At a monthly cadence, that slack disappears. Data collection, valuation, review, and approval must fit into a smaller window. Next month’s cycle begins almost as soon as the last one closes.
In that environment, informal arrangements stop working. If it is unclear who chases late reporting, who reviews a movement in a mark, or who has authority to approve it, those delays overlap with the next cycle. The reviewers, approver, and ultimately, the auditor, have less time to engage with each mark, so each person’s role has to be explicit.
Every ambiguity that a fund could tolerate four times a year becomes a recurring bottleneck twelve times a year.
A well-defined operating model assigns responsibilities to complement and enhance the technology.
Target-state operating models
The funds that focus on perfecting the operating model have a smoother implementation of the technology and improved change management necessary for hitting the ground running when it’s time to go live.
Who owns each stage from data collection to valuation to review to approval? Who meets with the deal teams and when? What events trigger a review between regular reporting cycles? Who is responsible for adjusting the marks to represent the facts? How does escalation work when a mark moves more than expected? What are the thresholds? How does the valuation committee operate at a faster cadence? What do auditors need to see to remain comfortable? How long does each step take? What part of the month should it occur?
These are not technology questions. The technology can be customized and configured to fit the people and processes. Platform selection should follow the operating model design, not precede it. Funds that choose the tool first often end up backtracking and missing key milestones and senior leadership concerns arise.
AI’s involvement
AI, of course, has a role in portfolio monitoring and valuation. It would be silly to ignore AI’s impacts in calendar-based processes such as these. Three use cases matter most:
The first is data extraction. Financials, board decks, and reporting packages arrive in inconsistent formats, and pulling the relevant figures into a structured form is slow and prone to human error. AI compresses that effort and removes the grunt work.
The second is reconciliation. Data moves across different sources, systems, and time periods with process errors leading to drag. AI can surface discrepancies faster, trace them to their origin, and customize the flow.
The third is reporting. Valuation memos, audit memos, and resulting PortCo, sector, and industry reports can be generated automatically and customized to fit the fund’s reporting requirements. The leading technologies include MCP connectors to bring the reporting to modern day.
In all three, AI accelerates the work but does not own it. The mark still needs an accountable team and an air-tight design to execute the monthly and quarterly processes on time.
How we can help
At Alpha Alternatives, we specialize in implementing portfolio monitoring and valuation technologies, but our true expertise is best-in-class Advisory. Alpha starts the process with a comprehensive review of the firm’s existing operating model; a focused diagnostic of how the processes work today, where ownership is unclear, where decisions are made informally, and where the process lacks clear responsibilities. We define the Target Operating Model that guides the technology selection and implementation.
If these topics are on your plate, message me directly or email Jackson O’Brien at [email protected].
Jackson O’Brien, CFA is a Director in the Valuation and Portfolio Monitoring division of Alpha Alternatives
