privateInformant^TM is a financial data service coupled with an online reporting and analysis application that tracks the investment activities and performance of underlying portfolio companies for limited partners.* The privateInformant team at the Burgiss Group receives and reviews quarterly financials, enters the data in the privateInformant private equity database and audits to confirm its integrity.

To the user, privateInformant is about the data, and the way to the data is through our high quality, web-based software. Simple to install, use and upgrade, the privateInformant application runs from any Windows web browser. From it, it is possible to examine the details of every investment, do ad hoc analysis and run summary and detail reports. Subscribers to the service open and log into privateInformant to access and analyze the data, as well as to run reports on the performance of their investments.

Tracking Portfolio Holdings is Difficult

Why privateInformant? Because for limited partners, the tracking of underlying portfolio companies is not an easy task. Even if a limited partner were to staff appropriately to accomplish the quarterly review and data entry of financial information, this data would still need to be organized, presented and analyzed in order to be meaningful. Additionally, it also must be complete falling behind a quarter or two for even a few commitments affects the integrity of any analysis. Most fund managers report on their investment activities on a quarterly basis. By the time the partners receive the report, it may be sixty to ninety days after a quarter's close.

To further complicate the task, few general partners follow uniform guidelines for valuing or reporting on investments to their limited partners. Reporting quality varies in content, format, timeliness, completeness and accuracy.

Capturing the Knowable

On some level, there is no such thing as too much information. With private equity investing, the ideal is to capture complete information about every investment every dollar invested and returned, and every name change, merger and acquisition. Yet there are no universally agreed upon industry standards for reporting this information, and there are even competing ideas about what constitutes complete information.

Ideally, limited partners in funds receive periodic schedules of investments with underlying cost, market value and proceeds for each portfolio company. The general partners should also supply basic information about company characteristics, location, industry focus and other pertinent details. If the fund manager is extremely diligent, investors are supplied with all of the details of every security purchased and sold, methodology for valuation, proceeds data and so on.

In our experience, this is the rare case. If an investor is extremely diligent, more details can often by gleaned from the general partner, but not without some cost in time and aggravation. A new investor in private equity with only a few fund investments may not find this time consuming. Further, it may seem reasonable that all fund managers supply this information.

Experienced investors know the limits of the value of this information. To many experienced investors, the intricate details of each purchase has emerged as less important. What exactly was that cost of a particular company on December 15, 2002? Preferred A? When was it sold? Was that cost a bridge loan? What happened to the loan when the company was liquidated? These details are often not reported by the general partner because they are regarded as immaterial at an assumed level of abstraction.

Each investor determines if it is important to know the exact security instruments of a company. The general partner often makes many of these judgments for the investors and reports accordingly. The reporting medium affects the usefulness of the data as well. Some general partners supply quarterly reports electronically. At face value, this would seem quite useful, as it implies an ability to manipulate the data, possibly perform calculations or analyses. In truth, these reports are typically in PDF format and require re-keying or, at the very least, scanning and significant data clean-up before any analysis can begin. Standards for naming, punctuation, unique identities or descriptions must be established to ensure the validity of any analysis after conversion to a spreadsheet or database application.

It can get much worse. For example, an investor in a fund of funds usually only receives a schedule of investments at the fund level. Quite often, the information for a fund of funds will lag behind the reporting of other investments by ninety days. privateInformant works in this messy world
of incomplete standards and challenging data.

The Private informant Model

The privateInformant model was carefully designed to provide information as uniformly as possible while assuming very little. Instead of assuming that all information will be provided, the privateInformant data services team works with what is commonly provided by fund managers. Further, the team has developed strategies for capturing additional information and building a more complete picture of a portfolio despite missing information. Here are the fundamental questions privateInformant helps answer:

What did the partnership buy? When did it buy it? What did the investment cost? What is its current value? How much has this company returned to the partnership? What is its residual cost? Where is the company located? What does the company do?

And a bit deeper:

Are other partnerships invested in this company? What is my aggregate exposure to this company? To an industry? To a geographic sector? To a stage sector? Is this a public company? How many shares does the partnership own? How did the partnership value this company in the latest quarter? What is the multiple for each company? What are my Top 20 holdings?

These are the big questions and there are no shortcuts to the answers. To answer such seemingly simple questions, keep in mind that first, it is necessary to accomplish the following:

1. Uniquely identify every partnership and portfolio company.
2. Track incremental changes to cost, cost basis and proceeds.
3. Capture valuations.
4. Capture company characteristics, including name changes, mergers and acquisitions.

With a typical portfolio of fifty funds, there may be several thousand investments in portfolio companies, representing tens of thousands of data points over time. Imagine the time and resources invested before a single portfolio snapshot can be had.

Archive, Analyze, and Audit

The privateInformant team at the Burgiss Group is a staff of trained professionals who check in partnership reports, electronically archive them
and input data in a matter of days or weeks rather than months. The privateInformant private equity database keeps track of a multitude of data points over time, and, once the data has been input, it immediately becomes available to subscribers for reporting and analysis.

Whether financial reports arrive via fax, internet or regular mail, each report is handled in the same way. Internally, our audit procedures and software are the key to the team's managing of reports and workflow, from receipt and archiving of reports through data analysis and entry to final audit and proofing.

* Private informant has passed Microsoft SQL Server (32-bit and 64-bit) tests run at the Microsoft Technology Center and supports Microsoft SQL Server clustering and failover. Testing methodology is available upon request to qualified organizations under NDA.