A THOROUGH UNDERSTANDING OF PRIVATE EQUITY

RETOUR SOMMAIRE

A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2010

PERSPECTIVES FOR THE INDUSTRY

4.3.3

More information required by investors

More vigilant, LPs have also proved to be very demanding regarding fund transparency in re- cent months. The increased uncertainty of the recession has resulted in LPs requiring more fre- quent and detailed information to monitor portfolio performance more effectively and to identify and focus on poor performance in a timely manner 61 . Many LPs now require to be better in- formed about the underlying companies in their private equity portfolios. More specifically, LPs want to get a better idea of how earnings, debt levels, and valuations are changing over time. This information is critical because it allows them to better monitor the underlying companies, make comparisons across sectors and deal types, and measure the effectiveness of the GP. Quality investor reporting and transparency are key tenets to the success of private equity as an institutional investment asset class. Historically, requests from LPs for additional information were often met with resistance by GPs. However, times are changing and the ILPA’s private equity principles now include recom- mendations for making the selected financial information (valuation, revenue, debt, EBITDA, profit and loss, cash position, burn rate) available to LPs as a part of the quarterly report. This is a major step towards greater transparency for investors.

61 Source: Ernst & Young, “Shifting sands, Limited Partners’ perspectives on the future of private equity”, September 2009

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