Investors Seek More Transparency From Private Equity Managers

By Mani
Updated on

Nearly 89% of investors who responded to an Opalesque and Intralinks survey said they won’t invest in new funds due to transparency concerns. Additionally, the survey shows that only half of investors who responded think they are getting enough transparency from their current managers.

Opalesque and Intralinks’ survey titled “Let’s Be Clear: A Common View On Transparency” examines how LPs view the disclosures they’re getting from GPs and what’s still missing from those reports.

Transparency demands from hedge fund managers

The survey highlights that only half of investors who responded to the survey believe they are getting enough transparency from hedge fund managers. The survey points out that during the past ten years, not much has changed in the way fund managers communicate with investors.

The survey points out that with the fund industry assets just under $3 trillion mark and private equity raising about $98 billion in the aggregate during the first quarter, investors, however, are not shying away from the industry, even if operational reporting isn’t where it should be. The survey highlights that a good investor communication program can actually be a competitive advantage for fund managers.

Some expectations that investors have regarding their fund managers include: fund disclosure in electronic format to facilitate in-house analysis, information on both leverage and exposure metrics and consistency in the disclosures.

The survey also notes an alphabet soup of standards groups including ILPA, OPERA and HFSB have all tried to set up disclosure standards for hedge funds and private equity with mixed success.

Private equity: Interest in community banks

Opalesque’s private equity strategies issue dated May 30, 2014 also includes a report on how new financial firms are stepping in to line up private capital behind community banks in a variety of ways. For instance, Signature Group Investments recently purchased a pool of non-performing and performing loans from a New York City-based community bank. The report points out such an investment would facilitate community banks in removing portfolios of businesses that could keep them from being in compliance with the new financial regulations or could just be a drag on the overall financial profile of the bank.

Opalesque’s recent issue also includes an interview with Charles Van Vleet, Textron’s private pension fund CIO, who believes benchmarking against the HFRI is a mistake in a rising S&P environment. He also forecasts a great merger between private equity and hedge fund managers. He points out hedge fund managers may be better at managing structured debt, as “fantastic opportunities exist for hedge fund managers who are thoughtful about creating a new vehicle for those type of ideas”.

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