Nearly four fifths (79%) of private equity fund managers expect investors to demand more transparency in reporting on portfolio company performance over the next 12 months, according to a report from Intertrust, reflecting growing concerns over the impact of the Covid-19 pandemic.
For its Global Private Equity Outlook 2020 report, Intertrust interviewed around 150 private equity fund managers across Europe, North America and Asia to identify the risks and opportunities facing the sector over the coming year.
As well as portfolio company performance, more than half (59%) of general partners (GPs) expect limited partners (LPs) to call for improved disclosure on fee structures, as well as risk exposures (55%) and expense allocations (48%).
As GPs respond to ever-rising demands for transparency among LPs, 70% of managers agreed that investor reporting has become one of the biggest pain points facing private equity CFOs. Some 61% expect to see a growing appetite for outsourcing fund administration over the coming year.
Call for transparency
Asked to assess how private equity managers are prioritising investor reporting improvements, two thirds (66%) cited greater transparency in the level of information supplied, such as the reporting templates issued by the Institutional Limited Partners Association, designed to encourage uniformity in fees, expenses and carried interest disclosures.
This was followed by the need for real-time information (56%) and more frequent reporting (34%).
A large majority of respondents (84%) believe the answer to dealing with increased demands for investor reporting and transparency lies in adopting digital solutions, such as a digital portal offering anytime access to financial information.
impact of Covid-19
Alex Di Santo (pictured), Head of Private Equity at Intertrust in Jersey, commented: “Covid-19 has further increased LP demand for more granular data from GPs and it’s no surprise that portfolio company performance data and fees are at the top of their lists.
"Ad hoc investor reporting demands are putting increased pressure on GPs who are leveraging technology to maintain transparency.”
Kees Jager, Intertrust’s Head of Funds in Guernsey, said technology was the obvious route to managing the challenge presented by increased demand for reporting and data.
“Investors are becoming increasingly engaged with the performance of their portfolios, across all asset classes. We’re seeing growing interest from private equity managers in the type of tech-enabled support we can provide and expect this to continue rising in line with the push for greater transparency and operational efficiency.”
• To download the Global Private Equity Outlook 2020 report, click here