We spoke with the CFO of Ruilian Investment, one of China’s leading private equity firms, to understand how Quantium helped streamline their complex fund operations, increase the accuracy of their calculations and minimize the amount of time spent on routine tasks through automation.
THE CHALLENGE
Established in 2013, Ruilian Investment is a private equity investment firm affiliated with one of China’s largest securities firms. The firm targets investment opportunities in consumption, technology, healthcare, biotechnology, medical devices, electronics, and cleantech industries. With over 10bn CNY in Assets Under Management, the complexity of their fund operations required a comprehensive solution that would:
- Minimize time spent on routine reports and manual workflows, by automating capital notices and investor capital account preparation
- Mitigate the risks of inaccuracies associated with Excel when calculating realized/unrealized gain/loss at each entity layer due to complex fund structures
- Provide a bird’s-eye overview of the business through aggregated fund or investor group performance analytics, with clear, effective data visualization
“Our investors, our deal team and Ruilian’s senior management all expect prompt and accurate information when they request it,” explained Ruilian Investment’s CFO, Ren Meng. “Due to the complex nature of our fund structure and deal terms, we were spending far too much time on tasks such as capital call and distribution notices, individual capital account reports, etc, leaving us with very little capacity for higher-value work such as performance analysis.”
THE SEARCH FOR A SOLUTION
Meng led the Finance team on the search and evaluation process. They had a clear set of requirements; their funds’ complicated structure consists of feeder-master/parallel funds, multi-layer Special Purpose Vehicles (SPVs), deal-by-deal waterfall; all of which are prone to error when the calculations are done manually. For Ruilian Investments, there was no possibility of automating these calculations; the software available to them was not fit for purpose and they had no choice but to rely on Excel formulas.
Meng and the Ruilian team spent months evaluating solutions that didn’t stack up against their comprehensive list of requirements. “The large, well-established software providers we spoke with lacked the flexibility that we needed to effectively manage our funds,” said Meng. “In contrast, the startup vendors that we reached out to were too inexperienced for us to trust.”
However, things changed when Meng reached out to Quantium via our Founding Adviser, Anita Meng. She knew that Anita was involved in building Quantium’s product, and her track record and experience at Sequoia Capital gave Ruilian the confidence that Quantium would understand the complexities of their investment structure.
Now, Quantium is embedded in Ruilian’s investment operations and serves as the foundation of their fund accounting processes. “Quantium has helped us achieve far more than I originally envisioned when we decided to implement their software,” says Meng. “It’s more than an IT solution to us; using Quantium has given our Finance team a fresh, high-level perspective about how data is viewed in the private markets industry beyond financial statements. It has given us the ability to look at the bigger picture of how our business is performing, rather than merely focus on reconciling transactions or journal entries.”
“Quantium has helped us achieve far more than I originally envisioned when we decided to implement their software. It has given our Finance team the ability to look at the bigger picture of how our business is performing, rather than merely focus on reconciling transactions or journal entries.”
HOW QUANTIUM BENEFITS RUILIAN INVESTMENT
1. Sophisticated software
Quantium stood out from other solutions due to its sophistication as a private market specialized system, and its ability to handle calculations, reporting and analysis for complicated fund structures. With Ruilian’s many investment entities, having data structured in a chart format provides Ruilian’s team with a much-needed bird’s eye view of their fund operations, and allow them to visualize inter-entity relations with ease.
Additionally, data presentation beyond accounting perspectives was difficult for the Finance team to achieve; providing information to stakeholders required a high-level perspective that looked at the big picture of the business, which generic accounting software was simply unable to provide. Quantium’s powerful data engine helps Ruilian organize and display fund performance data from a single-fund perspective as well as that of aggregated perspective across all funds, as well as from single investor or investor group perspectives. “This has empowered the Finance team to think beyond the accounting and collaborate better with senior leadership and investment teams,” said Meng.
2. Increased accuracy, saving time
Data accuracy has historically been a stumbling block for Ruilian’s fund management team. The lack of tools to automate calculations meant they were reliant on Excel and standard accounting software, both of which were not suitable for the complexity of their fund operations.
Calculations such as automatic pick-up of realized/unrealized gain/loss at every entity level were extremely challenging, given the multiple layers within their SPVs as well as allocations. Waterfall and IRR calculations posed additional challenges, as Ruilian Investments calculates waterfall on a deal-by-deal basis rather than on a whole fund basis. Neither their generic accounting system nor Excel could fulfill their bookkeeping needs. Quantium was able to automate these processes, making previously painful workflows virtually painless and vastly improving the accuracy of their reports and bookkeeping.
“We’re far more confident in the accuracy of the information we provide to stakeholders, because we can easily double-check Quantium against our own accounting records. We also spend substantially less time on routine work like drawdown notices and capital account statements, which is a huge advantage for our time-poor team.”
“We’re far more confident in the accuracy of the information we provide to stakeholders, because we can easily double-check Quantium against our own accounting records,” Meng said. “In addition, we spend substantially less time on routine work like drawdown notices and capital account statements, which is a huge advantage for our time-poor team.”
3. Expertise
From the initial meetings with Quantium, Meng was impressed by the depth and breadth of the Quantium team’s operational expertise. “What stood out to me straight away when we began engaging with Quantium was their knowledge of the industry – and this is still the case during our interactions with them until today,” said Meng.
“Right from the start, the Quantium team understood exactly what we need, and all our requests or concerns are properly resolved when we raise them. I always leave our meetings inspired by Quantium’s insights on how we can do things better, in ways that our team had not thought of.”
The high standard of Quantium’s service and their team’s attention to detail has also been extremely helpful to the Ruilian Investment team, setting them apart from the other vendors they had considered during the evaluation process.
“We’ve always found Quantium’s team to be highly efficient, and their excellent knowledge of industry practices has been a valuable asset above and beyond the software,” said Meng.
“Their service levels and professional advice continue to evolve as their team spend more time working with ours. They are developing a deeper understanding of our investment operations and thus, they often make recommendations that will enhance our workflows.”