Private markets have experienced phenomenal growth over the past decade, attracting institutional investors or Limited Partners (LPs) to significantly increase allocations. According to Preqin, the alternative assets market is projected to reach $29.2 trillion by 2029 from $16.8 trillion as of end-2023, representing an annualized growth rate of 9.7%. This expansion is accompanied by evolving geopolitical risks, declining policy rates, and a macroeconomic environment that is more challenging than in the pre-pandemic era.

As private markets continue to mature, reporting transparency has emerged as a critical pillar for fostering long-term relationships between LPs and General Partners (GPs). Transparency in reporting not only builds trust but also equips LPs with the necessary insights to manage portfolios effectively.

Increasing expectations for granular, timely reporting

Private market investments were previously characterized by limited and infrequent reporting, with investors often receiving updates only quarterly or annually. However, over the last decade, the reporting expectations of LPs have evolved significantly. They demand more detailed, timely and frequent reporting to stay on top of their investments and manage their portfolios effectively.

According to a Preqin study¹, 69% of institutional investors said access to more detailed reporting would enhance their relationship with their asset managers. 

LPs, thus, seek greater visibility and proactive communication from GPs to ensure their investments align with reporting obligations and risk tolerance.

Transparency fosters trust

In private markets, where investments are illiquid, long-term and often complex, transparency is a key tool to build and maintain trust. It fosters a sense of security and confidence that a GP is operating with integrity, making informed decisions and providing LPs with the information they need to manage their portfolios effectively.

By providing LPs with insights into the thought process behind key decisions, GPs can foster a sense of partnership rather than just a transactional relationship. Transparent decision-making helps LPs understand the complexities of private market investments and builds respect for the GP’s expertise and judgment.

According to 2022 Bain & Company study, funds that prioritize transparency see greater investor satisfaction, which translates to longer-term relationships and potentially higher levels of re-investment from LPs.

Technology critical to automate investor communication

As LPs demand more detailed and frequent reporting, technology has emerged as a key enabler in delivering transparency efficiently. Digital platforms, data analytics tools and artificial intelligence (AI) are revolutionizing the way GPs communicate with LPs, making it easier to provide detailed, timely and bespoke updates.

Conclusion: 

In an increasingly competitive private markets landscape, transparency is not optional - it is a strategic imperative. As LPs seek greater visibility and accountability, GPs must adopt advanced reporting practices and leverage technology to deliver timely, accurate, and detailed insights.By fostering open communication and embracing digital tools, GPs can build enduring partnerships with LPs. In doing so, they not only strengthen relationships but also position themselves as leaders in an evolving market. As the industry evolves, transparency will remain the cornerstone of trust, enabling both LPs and GPs to thrive together.

¹ Preqin, 2023