Private market investing has gained ground among allocators in recent years. It offers strong diversification benefits and the potential for higher returns compared with public market opportunities. Limited partners have responded by boosting their private market allocations to record levels. But those higher allocations to the private markets require more sophisticated, objective, and comprehensive insights to create the results LPs are looking for.
To that end, PitchBook analysts are well-versed in the ins and outs of allocators’ struggles and successes. Two of those experts include:
Hilary Wiek, CFA, CAIA
Senior Strategist
Hilary Wiek is a senior strategist at PitchBook, where she advises on and produces PitchBook’s coverage of fund strategies and performance, publishing primary research on the alternatives space and contributing to core report development.
She has over 20 years of experience in asset owner, manager, and advisory roles. Prior to joining PitchBook, Wiek was the director of investments at the Saint Paul and Minnesota Foundations, where she handled portfolio management, impact/ESG, investment diligence, and monitoring and investment operations. Before that, she worked in senior positions at Segal Rogerscasey (which was acquired by Marco Consulting Group and is now Segal Marco Advisors), the South Carolina Retirement Systems Investment Commission, Buckingham Financial Group, Dayton Power & Light and KeyCorp.
| Zane Carmean, CFA, CAIA Lead Analyst, Quantitative and Funds Research |
Zane Carmean is a lead quantitative and funds research analyst at PitchBook, where he conducts data analysis, creates financial models, and authors research reports and thematic analyst notes covering private markets.
Carmean helped launch PitchBook’s Quantitative Perspectives series, a report style that provides a fully quantitatively driven narrative of the current and future states of private markets. In addition, he helped build PitchBook’s proprietary valuation models to analyze the GP stakes market as well as cash flow forecasting tools to assist allocators in estimating future cash flow and commitment pacing needs. Carmean also helps build new capabilities for clients to leverage PitchBook data sets.
Prior to PitchBook, he was a senior associate at Green Street Advisors where he conducted the research and analytics behind many of the firm’s strategic research reports in the commercial real estate industry.
The allocator’s high wire act
Allocators walk a tightrope as they work to deploy maximum capital while maintaining sufficient reserves, in order to avoid defaulting on commitments. They also need to factor in unpredictable liabilities. They’re walking this fine line in a constantly moving environment, working to anticipate which direction the market will shift in order to keep allocations in balance.
| “ | Maintaining an allocation while private markets are slow to move valuations—compared to publicly traded assets—makes the private fund allocation experience as much an art as it is a science. Striking that balance is a challenge.”—Zane Carmean, Lead Analyst, Quantitative and Funds Research |
Beyond the allocation
In addition to the heavy lift of determining one’s overall private market allocation, LPs must determine where to actually place funds. Decisions must be made around:
Strategy
Depending on the size and objectives of the portfolio, LPs examine opportunities within each asset class to find alignment with the investment thesis and risk and return appetite.
Managers
Identifying fund managers that fit the investment objectives for the LP and taking a deep dive into their performance track record, investor backgrounds, and strategic philosophy and approach is critical to making a long-term commitment.
| “ | What I wouldn’t have given in my work as an allocator to have the cash flow forecasting and commitment pacing tools in PitchBook. Those and other features, plus research, are incredibly helpful for taking a deep dive on the private markets and managers, and testing different ideas to inform allocation strategies.”—Hilary Wiek, Senior Strategist |
Solutions for cash flow forecasting, commitment pacing, and more
Historically, rough models built in Excel—either in-house or by a third party—have been deployed to track and anticipate call downs and distributions. But historical data, statistical analysis, and probabilistic simulations needed to track complex private market funds are often lacking.
With higher allocations and more complicated and mature portfolios, LPs and consultants need advanced tools to support cash flow forecasting and commitment pacing.
How to navigate cash flow forecasting challenges
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Portfolio construction
PitchBook’s cash flow forecasting and commitment pacing tools leverage extensive cash flow and historical fund data available in the platform. They use a baseline normalized cash flow profile for each private market asset class, along with portfolio simulations, to anticipate and model portfolio and commitment pacing data and help users pace capital deployment in light of existing and anticipated fund commitments to reach their target allocation. Forecasts are tailored to the user’s own portfolio of fund commitments and employ several adjustable inputs that allow for easy scenario planning.
Analyst Q&A: What is Portfolio Forecasting and why is it important?
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Fund manager sourcing and preliminary diligence
PitchBook tracks thousands of private market fund managers, inclusive of PE, VC, real estate, real assets, private debt, fund of funds, and secondaries to offer LPs valuable insights into investment strategies and historical performance. Access to data such as fund return profiles, investments made, investment team history, IRRs, cash flow multiples, and liquidity events can illustrate a general partner’s true strengths and weaknesses—and allow LPs to be better informed when selecting managers.
Private market benchmarking
PitchBook’s benchmarking tools, Benchmarks Reports, and Global Fund Performance Reports help LPs better understand fund performance over time, relative to other asset classes and strategies. These tools provide a comprehensive view of performance within and between strategies, as well as across vintage years. The returns of private market funds are also measured relative to public market alternatives using a public market equivalent metric.
What LPs are saying
PitchBook enables LPs to expand their private market allocation and create more wins.
| “ | —Manager, corporate pension |
| “ | —Director, family office |
Helping our clients win what’s next
Allocating to private markets is a perpetual cycle that requires continuous monitoring and adjustment—it’s never a one and done. Using PitchBook’s cash flow forecasting and commitment pacing tools, LPs can develop and refine a portfolio that achieves their objectives.
