Brandon Newland

Hi, everyone. Welcome back. My name is Brandon Newland. I lead our Private Markets product management team at S&P. I'm joined by Jocelyn Lewis. Jocelyn, how are you doing today?

Jocelyn Lewis

Hey, Brandon, I am doing great. Thanks. I'm Jocelyn Lewis, Managing Director at S&P Global Market Intelligence, where I'm Head of Private Debt commercial strategy across software and services.

Brandon Newland

All right. So we're going to jump into some exciting guests and focus on the leading industry trends for private markets here on the podcast. Jocelyn, should we jump right into it?

Jocelyn Lewis

Yes, for sure. So this podcast is dedicated to enlightening you to the world of private markets from different views. So yes, Brandon, let's go.

Curious about the adoption of technology within private markets. Do you ever wonder if you're using your firm's existing technology to its fullest potential and whether you have the right technology solutions to manage the ever-growing data requirements across various stages of your firm's investment life cycle? Well, if so, you're in the right place. Today, Brandon and I are joined by Nick Fox, a data and systems manager at AEA Investors LP.

Nick describes himself as a lifelong nerd turned experienced product and platform management professional with a focus on the intersection between new product development and user experience. And throughout his career, Nick has had various roles at large and small institutions implementing platforms that drive measurable change and business process improvement across the front and back office. Nick is leading the charge in their digital transformation using technology to scale and enhance existing workflows to drive value for the business. Nick, thank you so much for joining us today. How are you?

Nick Fox

I'm good. Thanks for having me.

Brandon Newland

Fantastic. Let's jump right in. So to frame today's discussion, Nick, would you please briefly describe your experience with the evolution of technology leveraged by your firm?

Nick Fox

Sure. I think it might be helpful to start with a little history of AEA. We are a 55-year-old private equity firm. And just like most firms of that age, you tend to have a lot of tech debt over that time. You tend to have processes that are instilled in the culture and the DNA of the company itself, and it can become really hard to unwind some of those.

So when I came into AEA about 18 months ago, I came into a company that was highly mature in its processes, but highly immature when it came to its technology. And the problem was we didn't have much of a need for it. You didn't have people clamoring for technology because we weren't missing anything. There were no missed opportunities, no missed deals. There was no lack of business being done.

So everything that I had hoped to do was originally just to streamline and make things better, wasn't going to add value. So I had to end up looking for what would drive value. The thing that I ended up landing on was scalability. And I think that, that's a theme that a lot of people listening can probably appreciate. We have a highly talented set of associates and VPs that are doing really technical work.

So anything we could do to install platforms and systems that would allow them to scale bigger, do more work and do it more effectively and efficiently was just going to be something that was going to add value for the firm.

Brandon Newland

So are there areas where you're seeing that scalability applied to different workflows where maybe you're at a point where you're walking, but you want to run.

Nick Fox

I actually like the way that you did that because a lot of people talk about the whole crawl, walk run model in terms of an overarching model, where you'll talk about your digital transformation in terms of where are you. But it's much more granular like you just said, where individual initiatives can be at a crawl while others might be at a run, right? And so in that way, we are really heavily focusing right now on tech enabling our financial reporting.

So that's quarterly valuations, that's portfolio review and things of that nature. And we are currently allowing other things to continue to crawl. Like I said, we have a really mature process when it comes to most things. So letting those things crawl along technically means that they're actually running from a process perspective. So we put most of our eggs in the financial reporting basket for the time being, but we're going to keep flipping those switches as we go.

Jocelyn Lewis

So working in specific focus areas, I think that's really smart. If you take on too much at once, I think we've all tried to do it at some point. It's just kind of overwhelming. But one of the things that when I think about private equity in general, it's so dynamic and fast paced. So how have you really enabled the organization to use technology, but then at the same time, keep pace with everything else that's going on.

Nick Fox

It's a really good question. I always start from the outputs first. And this is a way that I'm probably different than a lot of other people in my space. A lot of people take a look at what they need to put into a system and they spent all their time perfecting the inputs, figuring out exactly how to format their various financials and their various metrics, figuring out the time series and the reporting periods that they want to report across. And then they're left to figure out the outputs a year, 2 years, 3 years down the line.

And in order to balance the need for immediate results and eventual success, I always focus on the outputs first. So what I did was I just did an audit of what we are currently creating across the firm, understanding who is creating it, who the stakeholders were, how much time it was taking and how much time it would save if we could strip away pieces of it or automated entirely?

And through that process, we found a number of processes that make good candidates for initial wins. The first one that I saw are monthly dashboards that come from our portfolio companies, which give us high-level sort of sanity checks and health ratings for our companies to see how they're doing across the board month-to-month. And the other, as I mentioned, is our portfolio review and valuations process.

So we started by targeting the dashboards. And those dashboards, I consider really low-hanging fruit because ideally, we have all of that data already. It's just a matter of putting it into a system that allows us to spin those reports out over and over and over again without human intervention.

Jocelyn Lewis

Having those dashboards, is that something that you would say was more of a quick win to show that, oh, look, what technology can do, what can it power versus taking the stance of, let me tackle something that's really onerous and really difficult first. It will have maybe a really big impact. But gosh, it's going to take a really long time to actually realize that.

Nick Fox

I'm a huge fan of getting quick wins because I think you end up getting a lot of momentum and a lot of buy-in in order to do bigger, better things down the road. And then you can start tackling those bigger problems. And the advantage of tackling those last is that normally, you already have some base of data in a system that you can pull from. And then you're just filling gaps. So you never actually have to solve that whole problem all at once. You end up just solving the gaps. So identifying those quick wins, getting that wind in your sales and getting data in the systems that you're creating is, in my mind, the best way of doing that.

Jocelyn Lewis

That positive momentum, it's almost like contagious, right? Because once you see that, oh, something that was so inefficient, look how much better it could be, then it will spur up another idea that will say, oh, well, is this also something that we could potentially tackle? Like I'm sure you can see, correct me if I'm wrong, but after your financial reporting after you tackle that, I'm sure you already have in your mind, oh, we can do so much more.

Nick Fox

Yes. And it doesn't always come for me either. The very first demo that I did of our new dashboards for monthly reporting immediately afterwards, one of the partners walked up to me and he goes, do you think we could capture this other type of data in there as well. That's sort of the ideal, right? You want other people to start telling you what they need. And it shouldn't be the old-fashioned school of IT where I come up with an idea, I install it, and I tell everyone to use it and hope for the best. The business needs to tell me what's going to drive value for them.

Brandon Newland

So it sounds like it's taking a couple of different snowballs and rolling them off the top of the hill to gain that momentum and start building that overall cadence with the business. I guess any challenges that come along with that, any speed bumps in the road?

Nick Fox

So funny enough, the biggest challenge has been that I've sort of been a victim of my own success in that I've been doing this role in some capacity in various firms for better part of a decade, maybe a little bit more at this point. And the challenge is when something works, people want more of it. And you always want to respond to somebody when they're hungry. An internal client, when they're hungry, you want to strike, you want to deliver what they want, when they want it and you want to deliver it now.

And the problem is there's usually a road map, sometimes a multiyear road map that you are still indebted to and you still have to get across the line. So it's a challenge then to balance giving that person enough so that they stay engaged in the project, while also keeping to your original timeline as much as possible. So that the original stakeholders that allowed you to do it stay invested as well.

Brandon Newland

How do you make choices with that prioritization? I mean what levers do you pull on?

Nick Fox

That's probably the first one. The other is sort of looking at future business initiatives, right? What's going to drive the most value in the short and medium term and then prioritize them in that way, right? What is going to hit first, what's going to hit second, so let's work on them in that order.

Jocelyn Lewis

Do you ever feel resource constraint. Like when you have that momentum, there's that inertia to get things done, but you realize that teams are working on so many other projects. So have you leveraged kind of outsourcing in any ways to help you just as an extension of your team while still focusing on these critical stakeholder requests?

Nick Fox

It's like you know me. I make use of every resource at my disposal, internal and external. So the valuations and portfolio review piece as well as the dashboards, we're all running through eye-level. And in order to get that across the line, one of the best external resources that we've used in getting the portfolio review and valuations up and running has been S&P Global's expert services in that I shouldn't have to know a system in the nitty gritty.

I shouldn't have to get all the way in the weeds to get something done. So sometimes it's helpful to write up some requirements, describe a concept and then hand it off to somebody who knows the system very intimately. So you end up saving a lot of time by not having to learn the system yourself.

Jocelyn Lewis

It's that shared experience, so to speak, right, like you are where you are because you have experience in change management and technology adoption. I think that software providers in general should have a deep bench of professionals that each client is a story to them. They've learned from all the experiences that they've had with each one of their clients.

And so while it might be new to one client, what they're trying to achieve, someone who is an expert has seen this with other clients before and can say, you know what? This is what worked with these other clients from all this experience that I have, I'm going to take that knowledge and I'm going to use it in order to enable this firm to do even better now because we've already learned from it and continue that whole process.

Nick Fox

Yes. And I don't think it's a surprise then that most companies at this point that have a platform that have services that they offer have started adding sort of an expert services or a managed services component as well for exactly that reason, right? Because we all have our strengths, and most of us can't learn an entire system down to the nitty gritty in 6 months or a year or whatever it's going to take for that initial implementation.

So you end up multiplying your efforts by bringing in these people who already have the experience who have already solved these problems. Then you get to learn as you go because it's not like I'm handing these things off and then never looking at them again. When I hand them off to one of my contacts in expert services, I end up learning by how they've solved that problem, right? And I can look at what they put in place, see how it's structured and can leverage that for my own changes that I put in down the line as well.

Jocelyn Lewis

For sure. Do you feel pressure, are you challenged at all to show the value of how technology has really enabled that process and how it relates to an overall mission of AEA?

Nick Fox

Absolutely. And I think showing value is the key question at the end of the day. I don't think anything else really matters. I can put any technology in place. I can put a technology in place that automates someone sending an e-mail. I can put a technology in place that automates file structures. But unless that technology is driving value, it's not worth putting in place.

There's a lot of debate in my mind between vanity and sanity where I see a lot of people who are looking to put a mark on their year-end plan, right? A lot of people in the tech space want to say, we completed 12 projects. But at the end of the day, what did those projects accomplish, right? What meaningful change did they create in the business? How many dollars did they save, how many hours did they save, how many people did they supplement? Are we multiplying our efforts?

Or are we just putting technology in place because we have a budget, and we're going to burn it. And I think that a lot of people listening can probably relate to that because when it comes to budgets especially, people have this idea of use it or lose it. And in my mind, you should only use it if you're going to use it to drive value. because not using it and saving that money is its own form of value.

Brandon Newland

So it sounds like developing a proper ROI around every project that you're doing is tied to a best practice. So how else would you define like industry best practices? I'm sure you're talking with other folks in the similar roles such as yourself, what would the best practice look like across the industry?

Nick Fox

Two ways you have to think about it. The first is best practices in technology and the second is best practices in technology and technological process. The second, which is best practices in technology, are things that a lot of the industry is sort of centered around at this point. It's a lot of scalability, cloud-based services, SaaS for scalability as well. And I think all those things are uniquely valuable.

And I think for the most part, we're not having to convince our C-suite anymore of the value of those things. I think they're expected industry best practices. The challenge then becomes translating the current business needs through that lens through that technological process in order to try and get the best value for your money.

On a related note, though, I'll also say that I talked a lot about being output focused. And I think that, that's something that everyone listening can start doing today, which is a personal favorite thing of mine and something that I do every day to drive value because I think it approaches both sides of that equation, right?

So from a technology standpoint, the output is about how a human is interacting with that technology. They tend not to interact so much with the inputs. They tend to interact with the outputs, right? So the best practice around output design, report design, automation, things of that nature are incredibly helpful. And from a process perspective, if you're eliminating a piece of their current process and saving them time, it opens them up to learn the tool better because you're giving them the bandwidth they need in order to absorb that new information.

Jocelyn Lewis

And do you think being so output focused, like I view it as a goal, like you have a goal that you're looking to achieve. Do you think that’s how you have been so successful in gaining that kind of trust and that momentum?

Nick Fox

Yes. And I think that's the key is identifying the stakeholders and identifying the value to each of them in each stage, right? So just to look at this idea of a monthly dashboard. Traditionally, that was completely created and format and sent over by a portfolio company. But then they were also providing us with monthly reporting packets that had financials in them. And then we're also sending us a full data backup of all of their financials.

And now we've streamlined that into a single monthly report that is automatically sent out to them, they populate a much more limited set of fields and then they upload it. The internal team reviews it and it's in the system. Once it's in our four walls, we can slice and dice that any way we want. And what we've done is we've eliminated the sort of much more manual process for our portfolio company.

We've eliminated the need for our investment professionals to reach out to these companies in order to ask them if they have their numbers yet and sometimes poke and prod them to make sure they get them across the line. And then on top of that, to also streamline the output side of it, right? What were they doing to those numbers once they came in? How are they spinning them? How are they cleaning them? How are they processing them to make them useful for future reporting?

All that is now being done behind the scenes and under the hood. And each stage of that has value for somebody else. And I remember early on in my career asking how do we drive value for an analyst and being told the analysts don't need value. The analysts just need to enter the data. And I think that, that's a really old-fashioned way of thinking where you used to have your bull-pen full of 50, 60 analysts all in Excel, all having certain keys on their keyboard removed and not allowed to touch the mouse. And they were expected to just work through and get that data in.

I started my career in the middle office. I've been at Excel jockey. I have forgotten more in Excel than most people will ever remember. And I know that there's always value to drive for that person that is running those reports, that is running that analysis. And I want to find it. it's not always obvious, but if you start asking the question of how you can drive value at each stage in the process, you eventually will find it.

Jocelyn Lewis

I totally relate to you because I also have been an analyst before and have spent way too much time in Excel. And looking back, had some of this technology existed then. It would have really been game changing.

Nick Fox

The past 10 years has been an amazing journey for that technology, right, where I remember, beginning of my career, I was entering things into like a UNIX interface, which was Green text on a black screen. You have to memorize commands, and I knew them forwards backwards and upside down, right? I was running 10,000 line spreadsheets minimum of a day in order to process what needed to be processed that day.

And every morning, I would get sort of a 40,000, 50,000 line spreadsheet of all the transactions from the day before, and I had to reconcile that against my files. I did that by hand every single day without fail and I never missed a day.

And the idea that, that wasn't automated back then is shocking to people today, I think, because so much of that process is so easily automated or at least so easily augmented to make it easier for the person in the chair. And I think the fact that people find that sort of idea so alien is a really good mark of how far we've come in the last decade, and it will be really interesting to see sort of where we go next with it.

Brandon Newland

And is that why you think it's easier to approach the business with new ideas because the technology has improved so much from what they may have been used to in the past?

Nick Fox

Yes. And I think the other side of that same coin is that the business recognizes the value in technology now, especially a private equity company, right? We are used to going in and installing new systems into a business in order to improve their ROI, right? And so I think it would be sort of hypocritical not to have that same mentality about your own internal processes, right?

Brandon Newland

100%. Yes. And look, some of the best software has come spun out of private equity firms who built it in-house, as an example.

Nick Fox

And then sometimes get reacquired by that same private equity firm or a different one. And it's all people asking the same question of how we drive value, right? Is there a way that we can report these financials better? Is there a way that we can capture our CRM data better? Is there a better way that we can output it? So again, I think top to bottom, up to down in an organization, you have people recognizing the value of technology. The question is which technology.

Jocelyn Lewis

And so there must be some mentality of evidence that the technology provides some type of strategic advantage at AEA, what comes to mind?

Nick Fox

I think we are very early in our digital journey here. And I think some of the earliest signals that we have are small, but they are big in comparison to where we were two years ago. Just the fact that on a number of our key weekly reports around investment decisions and things of that nature, we've automated those.

And we have now handed those off to the teams to self-service, whereas before, that was a responsibility of an EA to manually solicit input for that report and then input it and distribute it. which is a highly inefficient system, right? Putting a human in the middle of that, you're expecting that person to have no sick days, not have any other work to do and hope that they can get it across the line at the same time every week.

And the truth of the matter is, often, they don't. And then you're spent wondering like, did I miss it? Did they miss it? What happened? And so by putting something on a timer, right, as simple as that is to automate a process and telling all the teams, this is now your responsibility. If you don't get it in, it's not on the report is, I think, a really big win from a cultural standpoint, which I think is something that a lot of people don't focus on enough because that culture of technology needs to be built slowly.

If you are entirely a manual firm, if you're listening to this and you're doing things in Excel today and Excel only, it's going to take you a little bit to get spun up and you have to look for those ways in which you can get those wins to get that value. And sometimes it's going to seem small, but Brandon, as you were talking about, it's like multiple snowballs after a while, right? And sometimes you just hope you don't get crushed by them...

Jocelyn Lewis

All of this technology adoption, the growth that you've had, the change management that you're dealing with, the real acceptability that people throughout your firm have with technology in general. And also just, I guess, the more confident they feel about technology from what they're seeing and even kind of with these dashboards that they like and they are saying, oh, we can even improve this in other ways, too. So how does all of that help tell AEA's story?

Nick Fox

I think that's an interesting question because I always joke that by its nature, private equity is not a tech business. It is a relational business. If a solar flare came tomorrow and knocked out all the electronics in the world, so long as you could hand an investment professional, a plane ticket and a legal pad, they could likely get deals done still. And so I think when it comes to telling the story, it's about telling the story of relationships.

And that can be in a number of ways. When it comes to financials, it could just be about freeing up the investment professionals time to maintain those relationships or build new ones, maybe to develop our pipeline further. When it comes to sort of our CRM, that's a key way that we can monitor relationships, right? How are we enriching that to make sure that we are contacting the right people when those people need to be contacted, making sure that we're reaching out to the right person that we have historical context for what's being discussed.

And as staffing on a deal changes, we're not having to hand over notes to somebody and hope that they can figure out how to catch that ball and keep running, give them all the tools they need to get that information and run it forward. So it's all about relationships for private equity, right? And so the more you can either enhance those relationships or provide the air space to maintain and build relationships, the better it's going to be.

Brandon Newland

It sounds like you're referring to your initial point around scale.

Nick Fox

Scale is everything. In an ideal world, technology effectively doubles your headcount without ever having to add another person to it, right? Every associate should be working like two associates because they enter data and the system is handling it from there. And then it comes back to them and maybe they do a little post-processing on it, but that whole middle step that is point A to point B, should be handled for them, right?

They shouldn't have to save something down to a drive and hope someone can find it, e-mailing somebody to let them know that it's there and the updated version is there. I think one of the most telling things is just how files are named. I think we're all familiar with the V1 through V100 and then finally the VF. And I think that, that in and of itself is very telling of the process that is all very instilled in us. And the process that's still largely at work at private equity firms.

And the idea that you would have to actually label something as VF for version final is, shows that there is a large chasm that we can tech enable because you should always know that your version is final. If you have a data lake, if you have a data warehouse of some sort, you should be able to push a button and refresh that data and in V1 get final numbers. And if you've opened that file fresh, refreshed again, right?

Always have the most current numbers. I don't care whether you created the file last year or last century, right? I want you to be able to push a button and get the best data so that you don't have these issues with versioning. You're not wondering if it's the current version. You don't wonder if it's the pro forma numbers or the as-reported numbers. Push a button, and you should get that.

Brandon Newland

I totally agree. Thank you, Nick, for your time today. We enjoyed hearing your views on the private markets industry and how we continue to leverage technology to monitor investment portfolios and operations. For folks that listened in, if you like what you've heard today, don't forget to subscribe wherever you get your podcast. And everyone, have a great day.

Thanks to our wonderful guests. We had a lovely chat today. Really appreciate everyone for listening in. And if you're looking for more private markets content, go to spglobal.com/research-insights, and you can stay tuned to find our next episode. Cheers everyone.

Jocelyn Lewis

Thank you so much. You can also connect with us on LinkedIn. Have a great day.