Accounting and Reporting for Limited Partnerships

What is a Limited Partnership (LP)?

A limited partnership is a legal fund structure designed to invest in both private and public business across multiple sectors and strategies. The role of the limited partner is to contribute capital into these fund structures while retaining none of the risk outside of their committed capital.

Limited Partners commit capital to the fund which is drawn down over the investment period. They cannot enter binding contracts on behalf of the partnership, and they are only liable up to the amount of their commitment.

The committed capital is used by the General Partners to enter and exit investments with the primary focus on generating returns. Limited partners receive distributions from these investments as they generate cashflow or if the position is exited.

General Partners receive management fees and are entitled to a percentage of profits if specific return targets are hit. Since these funds are not publicly traded there is little to no market data available to investors outside of reporting that is provided to limited partners, in PDF formats and on a 60–90 day lag.

Investing in Limited Partnerships 

The process of extracting valuable information from the disorganized data associated with the holdings of a limited partnership can present numerous obstacles. Because data comes from disparate sources, the quality, timeliness, and accuracy of the information requires cross-referencing and reconciliation.  

Manual examination of investment data is not only labor-intensive but also susceptible to mistakes, and amalgamating data from both alternative investments and conventional ones into a unified repository poses its own set of difficulties.

Improving on these processes, however, is no small task. Often there is no system in place, with employees grappling with unstructured data, downloading information from various sources, and then manually uploading the relevant pieces into spreadsheets or databases.

As portfolios grow in complexity, the need for a single, trustworthy source for both traditional and alternative asset data becomes ever-more important. Moreover, the demand for detailed investment insights across various dimensions like industry, sector, and ESG considerations is compounding with increased regulation.

Investors need a unified system across the investment lifecycle that ensures consistency and reduces the risk of data discrepancies, thus supporting operational efficiency and strategic growth.

What is LPx?

Clearwater’s LPx is a full-service solution for both public and private funds. It provides functionality and services for private fund transaction data and commitment balance data directly from the fund’s general partner that typically only exists for public funds.

The solution enables stakeholders to validate investment allocations and support strategic initiatives while ensuring timely and accurate accounting. With Clearwater LPx, teams can delegate tasks such as document retrieval, storage, normalization, aggregation, and reconciliation of transactional and statement data from the general partner, allowing them to concentrate on their organization’s core competencies.

What are the key benefits of Clearwater LPx?

• Reduce Manual Effort – Automate manual processes such as document retrieval, reconciliation, and reporting to save time and allow employees to focus on their core strengths. With the automated processes, there is no longer a need to manually retrieve statements from websites or emails, enter data into spreadsheets, or reconcile values related to NAV and commitments.

• Deliver Faster Data – Our internal process involves daily checks on investment sites for new documents. Upon identifying a new document, it is retrieved, stored, and the data is extracted. The extracted data is then uploaded to our site, where it undergoes aggregation, normalization, reconciliation, and is delivered to the reporting site.

• Utilize Multi-Asset Reporting – LP data is linked to Clearwater’s consolidated book of record accounting, providing your team with visibility into the entire portfolio. This enhances transparency, enables access to updated data, and facilitates calculations related to portfolio performance, investment policy compliance, book of record accounting, or shadow record accounting. The dataset in Clearwater can be analyzed at the portfolio level or segmented in any desired way for data analysis purposes.

• Facilitate Your Close – Clearwater’s reconciliation tools, based on flexible and knowledge-date principles, enable you to access the data supporting your lockdown even when provided with late information from the general partner. Calculations and reconciliations automatically include new balances and activities while preserving historical records. With dynamic calculations of NAV and commitment balances, transactions received mid-quarter ensure the most up-to-date balances possible.

Click here to learn more about Clearwater LPx. If you’re ready to take the next step, speak directly to an expert to learn more.