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Hello, I'm Alice Murray editor 
of the drawdown and welcome to 

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private Equity talks. 
The past two years, have 

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highlighted the importance of 
good liquidity Management in 

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private Capital funds, the 
ability to quickly provide 

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liquidity to portfolio companies
and or investors is an absolute 

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necessity for private Capital 
fund CFOs the fast forward to 

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today. 
CFOs also have to contend with 

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Rising interest rates and high 
inflation environment. 

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Against this backdrop. 
I'm delighted to be joined by 

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Jeremy Slade who heads up Amir 
and Asia. 

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Business of Hazel tree to find 
out how private funds CFO is, 

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are evolving their approach to 
liquidity management. 

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Hi Jeremy. 
Hi Alice. 

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Thanks for having me on this 
podcast, my absolute pleasure. 

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Okay? 
So let's click off and start 

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thinking about how private 
equities private Equity firms. 

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Approaches to liquidity 
management has changed in recent

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years. 
Yeah, I suppose well the obvious

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is the fact that all the 
businesses are scaling 

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massively. 
We're seeing increased number of

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funds increased assets, Etc. 
I'm sure you have better, you 

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have good measures around that 
in the drawer in the drawdown. 

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But but I think we're also 
seeing because of that. 

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You're seeing significant 
increase in Risk in the 

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processes there in. 
And you know then that's causing

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yet strange on the human capital
human capital in these 

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organizations can't keep up you 
know that and that's driven by 

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the fact they may be doing more 
mundane. 

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Just and they probably signed up
for when they became a fund 

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accountant. 
And then I suppose, you know, 

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maybe going back back to the 
beginning of that. 

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We've we see in a lot of 
organization we go into where 

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they have very siloed parts of 
the business which really should

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be joined together. 
Things like yo, the treasury 

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process, that matches. 
The cash management process is 

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often run by a different team of
people than people managing the 

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the the credit line side of the 
business. 

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And maybe there's other people 
doing the distributions Etc. 

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And these are not all joined up 
into one place into what we 

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would term as liquidity 
management and because you 

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managed very different to 
looking at just cash or debt is 

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bring the two together. 
Really to say how do we had 

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about how do these firms 
optimize that in the most 

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efficient way? 
And then you know, obviously 

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most recently what we've got is 
you know, with interest rates 

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going out, yeah, we've had more 
calls in the last two months, we

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have in the last year. 
So as you would imagine, it's a 

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lot of people worrying about. 
Well, I've got this cash lying 

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around somewhere. 
Is it in my being efficient? 

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And that's really a big area of 
concern for a lot of managers we

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dealing with. 
Yeah, and can we just dig in, on

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specifically why interest rates 
have caused this explosion in 

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people, picking up the phone and
wanting to speak to you? 

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Well, I suppose, probably most 
people would be listening to 

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this, and probably stating the 
obvious, but I'll say it anyway,

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but you've got obviously, you've
got a lot of inefficiency around

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people, people typically are 
when they're managing their bank

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accounts. 
And cash is moving around. 

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They're not necessarily really 
staying on top of it every day 

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because they generally put 
buffers in place because they 

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don't have timely information 
feeding internally into their 

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into a spreadsheet they're 
running or there's potentially a

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system they're looking at plus 
also that that's on the cash 

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side. 
So that means there's some 

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inefficiency is being left on 
the table there and then the 

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flip side of that is really on 
the on the credit lines here. 

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Obviously there was a 
essentially, an Arbitrage play 

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for the for the internal rate of
return you looking at Lines. 

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But the reality is that's 
diminishing, but it means it's 

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becoming almost a cost now. 
So so a lot of firms are really 

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looking at how they can make 
sure that they optimize all 

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their, their revolving, credit 
facility has some lines, and so 

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forth. 
Excellent. 

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Okay. 
So that's very much kind of how 

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the managers are seeing the 
world. 

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But what about LPS, what about 
their expectations in terms of 

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liquidity management from GPS 
and has that been changing at 

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all? 
Well, I suppose, It's a is a 

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downstream effect, Upstream 
effect. 

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Maybe it's probably better way 
of putting it in the sense that 

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it's reputational risk. 
I think is a big part of the 

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issue that GPS could have with 
their LPS and so forth. 

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So you know if if distributions 
are not paid on time or pay to 

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the wrong accounts or this, you 
know this there's friction in 

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the timeliness of processing 
things. 

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It's is having an effect on the 
LPS view of how they do due 

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diligence on all the Piece of 
that partnering with and I think

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other areas are things like a 
big thing. 

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At least, I'm getting 
questionable times around audit 

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Trail around transactions, and 
having a clear, audio on exactly

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what who is whose approved, what
where, and, when within within 

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one system or in one processes. 
Mm-hmm. 

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Yeah. 
Something that we've been 

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hearing about from CFOs. 
Is there liquid? 

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LPS just needing better 
communication better. 

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Ending of how cash he's moving 
in but I think predominantly 

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when it's moving. 
So yeah, can absolutely see how 

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that how that ties in. 
Okay, and what about complexity 

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so yeah, I mean complexity is Is
is I suppose our friend Hazel 

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tree, but essentially we have a 
lot of firms are launching more 

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funds. 
They have more sleeves within 

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the fund. 
Sometimes we have, they have 

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lots of different legal 
entities, with them within their

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investment structure and to be 
able to have a clear view across

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the whole structure. 
They really need to have a legal

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entity structure within their 
within their liquidity 

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management process. 
So they understand the other 

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cross Holdings between the 
different TVs and tax problems, 

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Etc. 
So so be able to that that 

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complexity just grows. 
Every time they had a fund. 

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It means they have to add 
another revolving credit line. 

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They have to, you know, add or 
bank accounts and sometimes 

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those bank accounts are with 
different banks. 

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So now you end up with multiple 
Banks where different internal 

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people are going on two 
different banking portals to put

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in wire transactions and 
approvals, Etc. 

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In many cases, we find people 
also potentially Outsourcing 

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part of these process to their 
fundamental. 

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Actors, which is fine, but often
often the fund administrator. 

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Is it becomes a manual process 
for them to plus also, when they

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Outsource things, they don't 
actually have transparency on, 

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what current what cash is left 
in the account at any given 

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time. 
So that that complexity is that 

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is sort of a compounded by the 
fact that they're trying to make

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their world efficient by 
Outsourcing certain functions 

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under a survey with a with 
another service provider like 

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the fundamental traitor but they
actually then don't have 

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transparency or where they stand
themselves. 

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Now you overlay that if you put 
a, if you overlay that with 

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interest rates where they are 
today, that becomes a bigger 

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problem because if they don't 
know where cash is, they tend to

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leave buffers in place which 
means there's cash. 

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Some people use the word lazy 
cash lying around. 

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There's not actually generating 
a return because sat in a 

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banking account not bearing 
interest. 

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So so you end up with 
efficiencies coming out of this 

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even though there's a lot of 
firms are trying to make the 

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world more efficient by 
utilizing outside service 

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providers. 
I mean, That's just one of many 

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examples. 
Yeah, yeah not having that good 

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data flow. 
Not being able to get that full 

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picture that single source of 
truth. 

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It's your favorite friend. 
I think is the industry's 

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favorite. 
I'm now you mentioned before how

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human capital plays the part 
into this and in some cases it's

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about, you know either trying to
throw more bodies at something 

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or battling against a lot. 
Turn that we've been seeing in 

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the industry. 
Can you talk to me about how 

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that's affecting the quality 
management? 

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Well, I suppose, you know, as 
opposed to talking about the 

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system, we represent his, we 
have, we have the ability to be 

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able to see see the systems of 
Portland portals. 

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So be able to see if if a if a 
IG P can see all of their bank 

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accounts and know what all the 
caches in their accounts and 

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what interested they're paying 
receiving on that all the 

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forecast cash to know. 
Well, what they could is they 

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need in the future, they can see
all of their credit lines will 

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In the same place to see, where 
all the airport, where all their

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lines are and what interests are
paying and be able to then 

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calculate what is the best way 
and most effective way of 

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managing my liquidity. 
That that's, that's great 

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because that's all normalized 
into one place. 

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So, what we do find is that we 
find a lot of firms. 

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They spend a lot of time, they 
have highly trained, highly 

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qualified fund accountants that 
are doing quite mundane tasks. 

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Just getting data organized in a
way to, so they can protect 

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their work. 
So often has 80% of the time 

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they do. 
Young workers, really organizing

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the datum. 20% of the time, 
actually doing the high-value 

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work, they were really hard to 
do. 

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So I think the idea is that we 
can deliver an understanding of 

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all of the data. 
All have a transparency across 

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all of their data, both both 
cash and and the debt side and 

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then be able to look at it from 
a purely quality perspective and

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understand what is the most 
effective way and do some 

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modeling around cash flows to 
see what is the most effective 

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way of actually. 
Expressing their internal 

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liquidity policy, this drives 
much more efficiency through the

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process, so they don't need as 
many people. 

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The people are not doing one, 
take tossing, or they're 

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actually just doing the 
high-value tasks which means you

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have more engaged staff in these
people don't want necessarily 

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want to keep leaving and so 
forth. 

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Yeah. 
And we often hear of people 

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where they literally all day 
long just doing posting wires 

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into banking portals and then 
doing the approval process and 

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then keying that into another 
system, like a general ledger 

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system to keep things all in 
step, Up. 

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Well this can be completely 
automating this day and age and 

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I think firms are as they are 
growing in complexity of 

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realizing they can't. 
It's not sustainable to add 

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another spreadsheet and another 
team of people, it just doesn't 

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work that well, they're really 
doing is adding more risk into 

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the equation. 
At the same time, is actually 

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not inhibiting themselves to 
scale Beyond keeping employees 

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engaged. 
Boosting retention levels. 

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What does the future of 
liquidity management? 

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Look like It's only increase in 
complexity of the business which

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means that there's any even more
need for the quality management 

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and better systems and process 
around it. 

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I think you know, we are seeing 
an exponent, there's still an 

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exponential growth in the 
private Equity space. 

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And I'm not just private Equity 
is probably Dead. 

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Real estate, the seeing across 
the board in it at all the 

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private markets. 
And in fact, what's interesting,

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is that we actually seeing a lot
of conversations around the 

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hybrid structures. 
So we're starting to see where 

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you are. 
The equity is it is going into 

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the more public space and we're 
seeing we actually have a large 

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number of Prior public clients 
hedge funds, alternative 

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managers that are starting to 
head into the private space. 

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So these areas are kind of 
merging into one, will turn out 

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of industry. 
And having one system that can 

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then service, all of those needs
is really what people are 

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looking for. 
So be able to solve for future 

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needs, they may or may not need 
today, but definitely a 

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neighbor, but enables them to a 
deficiency in to the process. 

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I think, I think obviously if 
you had notwithstanding the 

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fact, Science and Ops teams they
need to have higher value 

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activities. 
You know, a lot of this mundane 

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tasks that a lot of people 
performing and yeah. 

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And I think there's there are 
people that are Building Systems

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internally and some some 
processes internally, But 

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ultimately, to get to where they
really want to, they really need

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to put something that's going to
give them scale across the board

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and actors, as one ecosystem, 
that their Partners can come 

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come into and commissioned and 
Leo. 

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And obviously, under very strict
It's a security measures things 

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like fund. 
Administrator is performing 

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tasks within one environment. 
So that so that everyone is on 

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the same page and they're all 
sings the same song sheet. 

232
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I think this is a phrase. 
You want to use around this as 

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man single Source. 
Yeah, read my mind. 

234
00:12:14,100 --> 00:12:16,400
Yeah, absolutely. 
Kind of, yeah, creating 

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something that's unified and 
flexible enough to enable firms 

236
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to tackle or take opportunity of
whatever the future holds, I 

237
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Indeed. 
Yeah, it's tough. 

238
00:12:26,100 --> 00:12:27,500
Excellent. 
Well, that's fascinating to do 

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me. 
Thank you so much. 

240
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Thanks for your time. 
We enjoyed it. 

241
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Thank you for listening.