PitchBook News - How to forecast fund cash flows

For any investor that has added or is thinking of adding a private market allocation, the challenges can be daunting.

From manager selection to complicated fund terms to performance evaluation, there are many obstacles to deal with.

Two related issues that we have spent a lot of time thinking about are cash management and commitment pacing.

Currently, there are limited tools available that help allocators navigate the liquidity and commitment pacing challenges that can occur when building and maintaining a private fund portfolio.

Modeling fund cash flows and setting an optimal commitment schedule are often tasks left to rudimentary, rule-of-thumb models. A lack of robust datasets is a clear impediment to building comprehensive tools.

The issue is not trivial. Poor cash management and misappropriated commitments can make a sizable difference in the return profile of the entire portfolio.

Enter PitchBook’s Allocator Solutions: Cash Flow Forecasting and Commitment Pacing.

In our new report, we break down the methodologies we use to assist clients in managing a private market portfolio.

Leveraging our historical data on fund cash flows, we build empirically based, probabilistic forecasts and scenario analyses tailored to unique private fund portfolios.

Our simulation generator allows allocators to view their portfolio's cash flow profile in a new way, allowing for the measurement of potential cash flow breakeven points like in this single-fund example:

 

Additionally, our commitment pacing tool allows allocators to set optimal investment schedules using historical fund NAV profiles as a base:
 

Click for a bigger view of a simulated NAV profile.

 

Sustainable investing and ESG continue to carve out a niche in the investing landscape.

But this growth hasn't been without ambiguity or a lack of consensus on what they are and how they operate.

This week, our analysts hosted a free webinar on the prevailing sustainable investing philosophies, the groups behind them, and how this intersects with topics like greenwashing: watch the replay.