Trust, Data and the Next Ten Years

When it comes to data, private credit is where private equity was 15 years ago.

After months of pressure on the asset class, LPs want more transparency. But credit managers don't have great tools to deliver it. Excel is still the default.

By Charlie Tafoya's count, portfolio monitoring software has about 3% penetration in private credit, against roughly 40% among private equity GPs.

Private equity went through this transformation after 2008. Charlie saw it from Pantheon, investing in secondaries when the whole market was $8 billion. It's about $170 billion today.

LPs started asking for performance figures and valuation methodologies on a more regular basis. That demand helped the secondaries market grow. The technology to handle it didn't keep up. So Charlie, a self-described computer nerd, saw a way to bring all that data together.

“I was up for VP at Pantheon, so I definitely had the private equity career track laid out right before me. But yeah, I ultimately quit on a Friday, actually got married on Saturday and then started coding literally on Monday. So my father-in-law didn't know that I had left my private equity job at the altar.”

Ten years ago, Charlie co-founded Chronograph, which provides data management, valuations and analytics technology for institutional private capital investors. Eight of the 10 largest GPs now use its software, as do five of the 10 largest LPs.

Seventeen years on Wall Street taught him that the whole system is built on trust. In a regulated, audited industry, he argues, that means a system of record has to show who can change a value and how it's changed over time.

In this episode of the Modern Capital Podcast, Charlie and Marc cover:

• Raising $143 million at peak SaaSpocalypse fear, and why he asks his team to be 8% less comfortable
• Why there's no objectively right way to classify pre-IPO Uber, and why that's healthy
• Why the founder of a data company argues against industry reporting standards
• Who counts as a pure-play LP anymore, and what that does to the line between LP and GP software
• Why an RIA may not be equipped to pick managers, and what has to exist first
• Whether private credit resembles 2008, and the test Charlie applies whenever markets come under stress

Private credit now faces the data demands private equity faced after 2008. Charlie has watched this movie before.

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