Private Equity Compliance

CHAPTER 7Private Equity Compliance Technology, Business Continuity, and Cybersecurity

7.1 INTRODUCTION TO THE ROLE OF TECHNOLOGY IN PRIVATE EQUITY COMPLIANCE

Technology has played an increasingly important role in the management and operations of private equity firms. This is true across all aspects of a private equity firm's business, ranging from investment management through to operations. As technology has evolved it has also played an important role in influencing compliance management at both the general partner (GP) and fund level.

Increasingly GPs have devoted more of their compliance budgets toward technology-related initiatives. Similarly, the resources of a private equity firm's information technology function and associated budgets are increasingly focused on compliance-related tasks. There are a number of reasons for this. First, as noted earlier, with technology come a number of process efficiencies that GPs and their investors can benefit from.

Second, limited partners (LPs) who invest in private equity do not typically focus exclusively on this asset class and also typically allocate to other types of alternatives investments such as hedge funds and real estate funds as well as traditional fund managers. This is particularly true of large institutional investors such as pension funds and endowments and foundations. Other areas of the asset management industry have been strong adopters of information technology–related compliance initiatives. This has been particularly ...