Institutional Investors, Multi-Asset Portfolios, and the Need for Transparency in Private Equity

Institutional investors are increasingly adopting multi-asset portfolios, which now commonly include alternative investments such as private equity (PE).

While this diversification is essential for achieving long-term objectives, it adds layers of complexity to portfolio management.

Advanced market risk tools are critical to understanding risks—not just at the security level but across the whole portfolio.

The Challenges:

Complexity of Private Equity: PE reporting lacks standardization, making it difficult for institutional investors to compare performance or fully understand the risks within their portfolios.

Transparency Issues: Inconsistent fee structures and a lack of granular data limit LPs' ability to assess costs and returns effectively.

Data Limitations: Without periodic access to holdings and transaction-level data, managing and analyzing risks across multi-asset portfolios becomes a daunting task.

System Resistance: Many GPs face challenges in adopting more detailed reporting templates due to operational constraints and outdated systems.

Why Transparency Matters:

For institutional investors, multi-asset portfolios demand a holistic approach to risk management. This means having access to robust data and insights that enable ex-ante risk analytics, such as:

• Scenario Analysis
• Stress Testing
• VaR Analysis
• Liquidity Analysis
• What-If Scenarios

Without this level of insight, understanding market risks across the entire portfolio—especially with the inclusion of private markets—can remain elusive.

A Step in the Right Direction:

Institutional Limited Partners Association's (ILPA) updated reporting and performance templates aim to address these challenges from a performance reporting perspective:

• Standardized Reporting:

These templates provide a consistent way for GPs to report performance and fees, ensuring greater transparency and comparability for LPs.

• Options for Adoption:

By offering both detailed and simplified templates, ILPA balances the need for granularity with the practicality of system constraints faced by GPs.

• Long-Term Planning:

The implementation timeline (Q1 2026) gives the industry the space to adapt and modernize systems for better compliance.

The Bigger Picture

While ILPA’s efforts are a significant milestone, more is needed.

For PE to play a growing role in multi-asset portfolios, institutional investors must have access to high-quality data that enables advanced risk analytics.

Tools that provide insights into market risks at the portfolio level will soon become non-negotiable.

Without this, the lack of transparency and data may hinder the effectiveness of such tools, limiting their potential to guide investment decisions in increasingly complex portfolios.

Looking Ahead:

The journey to achieving full transparency and robust risk management in private equity is a slow one, but ILPA’s work provides a strong foundation.

The evolution of multi-asset portfolios demands that the industry not only adapts to new reporting standards but also embraces a future where data-driven insights and risk analytics become the norm.

As we move forward, the focus should remain on ensuring that institutional investors have the tools and data they need to navigate this complexity and make informed, strategic decisions.

#alternativeinvestment #privateequity #marketrisk #buyside