Private Equity Administrators (PEA) asks how transparency impacts LP decision making

In Q4 2014 PEA launched their new portal, designed and delivered to meet the needs of our customers and specifically to help our fund managers improve communication and deliver greater transparency to both their investors and their wider stakeholder community. This initiative was prompted by our own experience and our desire to deliver timely and detailed information to the fund’s stakeholders in order to assist and support them with their risk management and decision making processes.

While there is already a lot of information out there on the web promoting the virtues of greater transparency, we wanted to share with you the insights contained in an interesting report prepared by one of our competitors IAG, since this highlights a potential perception rift which if left unrecognised could damage key relationships.

According to the RRiPE Report (Reputational Risk in Private Equity) 92% of the GPs surveyed felt they were consistently meeting the reporting expectations of their LPs. In stark comparison only 42% of LPs felt their reporting needs were being met! This seems like a startling disparity and might in part be due to the wider constituency that makes up the institutional LP and their need for varying needs and the increasingly granular level of analysis which need to be performed on the available data.

In any event competing GPs really do need to “wake up and smell the coffee” and safeguard LP loyalty by ensuring that their needs are addressed, otherwise they may put in jeopardy their ability to raise follow-on funds from their existing investor base.

Interestingly the Report observed a number of issues concerning GP communication. While we may think GPs are a secretive lot, they too admit to experiencing communication problems within their own firms. 40% of those surveyed encountered slow responses to enquiries, 30% experienced poorly communicated personnel changes and nearly 20% experienced poor communication on reputational issues from the portfolio.

Now let’s look at what leads LPs to put a fund manager on review…

You guessed it…slow responses to enquiries (40% of LPs), poorly communicated personnel changes (52% of LPs) poor communication on reputational issues from the portfolio (39% of LPs). A further 41% put a fund manager on review for reputational issues associated with the GP and/ or its personnel.

Now ask yourself does your service offering facilitate or hinder transparency?

So what is the right solution to this communication problem? Answers on a postcard please, or you could simply read our next blog following our series on transparency.

We thank you IAG, Thompson Taraz and Pivot Partners for compiling this very honest survey and PEA look forward to supporting the industry efforts in this debate.

We really enjoy communicating, so let’s talk:

For a deeper discussion on how you can communicate more openly with your LPs, or how these issues may affect your ability to fundraise in the future, feel free to call James in Guernsey or Peter in Denmark if you would be interested in hearing more:

James Orrick / +44 1481 730988 /

Peter Toyberg / +45 70 20 40 61 /

Further reading:

RRiPE Report Reputational Risk in Private Equity

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