Seven things you should know about CFO 2.0

Increased regulation, growing pressure from LPs,'s a look at the most important changes chief financial officers have seen over the past two decades.

If you want an indication of just how far the private equity industry has come in the last 20 years, take a look at the role of the CFO.

Many funds didn’t even have a chief financial officer back in the 1990s. If they did, the post was purely a number-crunching one – essentially a glorified book-keeper – with LPs kept firmly at arm’s length. And if investors asked awkward questions? You’d simply tell them to “take a walk,” recalls veteran private funds CFO Andrew Sutton.

If only life were so simple today. The role has changed enormously over the last two decades as the private equity industry has developed. Be it increased regulatory demands, the growing pressure from LPs to know exactly how their money is being invested or the way technology has transformed the data landscape, the modern CFO bears little resemblance to their 1990 counterpart.

To find out exactly what is different, sister publication pfm and US accounting and advisory firm EisnerAmper undertook a two-year survey of more than 150 private funds finance professionals. In a special supplement to accompany the survey results, CFO 2.0: The New Frontier published by pfm in November, we talked to CFOs to discover what has changed about the role.

A strong sense emerges in the survey of a shift to a more strategic position. “The role has become more operational and strategic driven than financial,” a CFO at a leading US private equity firm said when asked how the job has changed.

“Over the last year I have spent a significant portion of my time on such tasks as fundraising, managing investor relationships, office build-outs, technology platform selections and implementations and advising our managing partner on a variety issues.”

Here are seven things we learned about how this crucial role has changed over the last two decades:

Back offices are under pressure

One key finding is that regulatory pressures and other demands really are heaping pressure on the back office. Unsurprisingly, given the increased compliance demands they are under, almost two-thirds of managers surveyed have increased the size of their operations/back-office teams over the past three years, and a good proportion intend to further boost their headcount in the next 12 months.

Accounting skills are most likely to be added, with more than one-third of respondents planning to make at least one addition to their accountancy teams. Around 15 percent expect to boost their in-house tax and compliance expertise.

As the workload increases, one answer is outsourcing. US fund managers have been less keen to outsource than their European peers but there are signs this is slowly changing. More than one-third of survey participants said they had increased their level of outsourcing over the past three years.

The SEC is upping the stakes

Nearly half of the firms have had or are going through an SEC exam, compared with just one in four in 2016. Today’s finance professionals have to have a stronger focus on SEC guidelines, one CFO told the survey.

Due diligence is taking up more of a CFO’s time

LP due diligence requests are also taking up more of a CFO’s time, with US institutional and foreign investors the two groups most likely to place demands on the back office, according to the survey. As one of our survey respondents said: “The back office is under more scrutiny from the SEC and investors alike and must respond to the reporting requirements accordingly.” Another – a CFO at a US buyout firm who also acts as the CCO – said investor reporting and the use of templates was accounting for a greater proportion of the workload.

The front and back offices are growing closer

Investors are not the only ones demanding more in the way of information. CFOs are also interacting more with people closer to home: their colleagues in the front office. More than two-thirds of respondents to the survey agreed the front and back office work together more cohesively now than three years ago.

CFOs are getting more involved in the deal process

The results also back the notion that CFOs are getting more involved in the investment process, with 46 percent saying this was because of increased regulatory oversight.

Outsourcing is on the rise

Compliance-wise, a number of issues are pinpointed, including the Foreign Account Tax Compliance Act, or FATCA, and the attempts by the OECD to clamp down on tax avoidance via its BEPS project.

As the workload increases, one answer is outsourcing. US fund managers have been less keen to outsource than their European peers but there are signs this is slowly changing. More than one-third of survey participants said they had increased their level of outsourcing over the past three years.

“Simple and routine works need to be outsourced further,” said one. Or as another respondent put it: “It’s become cost effective for some tasks especially where labour costs can be arbitraged without the loss of control or effectiveness. Politically, it’s easier to get budget for a contractor than an employee and you don’t have to deal with the HR issues.”

Cybersecurity is a top concern

One of the main hot-button issues raised was cybersecurity. As one CFO said: “I am very concerned about phishing emails, and other possible intrusions into our systems. We have ongoing IT security assessments by an outside firm, employee training and education and thorough policy and procedures, but you are dealing with human nature and that is out of our control.” Worryingly less than half of CFOs and operational executives said they felt “very well prepared” to handle a variety of cyber-threats ranging from the theft of personal information to ransomware and malware.

The conclusion? The job and the nature of the duties really have changed fundamentally. CFO 2.0 doesn’t just have to be adept at number-crunching but something of a strategic superhero facing “pressure to do more with the same or less,” as one respondent said. A tough task, maybe, but one which judging by our responses, the modern CFO has all the skills to handle.

This month’s edition of pfm Includes a special supplement called CFO 2.0: The New Frontier with a full rundown of the results of the survey and what they say about the changing role of the today’s finance professionals working In private funds.


More than 150 private fund CFOs, CCOs, COOs, controllers and tax directors completed our survey, with CFOs of private funds making up more than 60 percent of the sample. The multiple-choice survey covered a range of internal, external and regulatory issues facing the private equity industry. It spanned back office versus front office, compliance and regulations, cybersecurity/privacy laws, proposed legislation and risk preparedness. The survey focused on how, in light of industry changes, finance and operational roles and responsibilities have recently changed. The survey was conducted first in 2016, then again in 2017. While additional questions were added in 2017, the survey remained essentially the same as the previous year’s edition.