INSTITUTIONAL INVESTOR SENTIMENT SURVEy - PEI Media

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LP-GP Relationship Does your institution insist on a key-man clause when investing in a private equity fund? institutional investor sentiment survey n n n 69% 4% 27% Always Never Sometimes but depends on the fund manager foreword executive summary allocation Source: Private Equity International 69 percent of LP respondents always have a key-man clause when investing in a private equity fund. They believe that a policy framework surrounding issues, such as key executives’ succession, is paramount when making fund investments. Conversely, there is a very small minority (four percent) of respondents who never use a key-man clause when investing in private equity. Almost 30 percent of respondents invest using a keyman clause to a varying degree depending on the fund manager. This may be because the investor has used the fund manager on a previous occasion and a key-man clause is not necessary. Alternatively the investor may categorise the fund manager’s capabilities with several executives and not just key personnel. A key-man clause can vary slightly from fund to fund on policy details. However, if implemented, it will always lead to a temporary suspension of the fund from making further investments. Some specify no new investments if there are key personnel changes, while other clauses can be enacted if a number of key named executives cease to devote a certain amount of time into the partnership. In July 2011, the departure of two managing directors from Aria Capital triggered a key-man clause and the French fund manager was unable to make new investments until suitable replacements were found. The significance of the use of a key-man clause demonstrates the importance investors place on key players within the firm to generate sufficient returns on the fund. fees • lp – gp relationship future investments and concerns appendix: global fundraising page 21 www.privateequityconnect.com
institutional investor sentiment survey How is the level of GP communication and reporting? foreword n 5% Excellent executive summary n 60% Satisfactory allocation n 2% Too much, too detailed fees lp – gp relationship • n 32% There is much room for improvement future investments and concerns appendix: global fundraising Source: Private Equity International n 1% The GP’s phone line is disconnected and my e-mails bounce except when fundraising page 22 Only five percent of institutional respondents felt that the communication and reporting methods used by GPs were excellent while approximately one-third felt there was much room for improvement. LPs believe there is room for improvement due to ‘not all managers report according to certain levels of transparency’, ‘not enough detail on each call and distribution’, ‘more detail needed on portfolio and performance data’ and finally ‘delayed reports and insufficient details on deal flows’. It is important to note that 60 percent of respondents find GP reporting methods to be satisfactory and, although there is room for improvement, this is not to say that current processes are not adequate. ILPA has addressed issues of GP reporting best practices and they recommend that capital calls and distributions should provide information consistent with the ILPA Standardised Reporting Format. It also states that GPs should provide quarterly projections on capital calls and distributions. This should lead to more uniformity in the information streams LPs receive from their fund managers. Currently the frequency and content of GP reporting is dependent on the fund’s individual governing policy. ILPA suggests that the LP could use the standardised reporting templates if they have specific reporting requirements and request additional commitments from the GP in a side letter. www.privateequityconnect.com
Page 1 and 2: Institutional Investor Sentiment Su
Page 3 and 4: institutional investor sentiment su
Page 5 and 6: LP Respondents Breakdown Where is y
Page 7 and 8: Allocation institutional investor s
Page 9 and 10: Over the long-term, private equity
Page 11 and 12: Co-investments provide LPs with gre
Page 13 and 14: Fee breaks should be negotiated dep
Page 15 and 16: Fees should be calculated in connec
Page 17 and 18: LPs are requesting a “Europeansty
Page 19 and 20: GP fund commitments should be a mea
Page 21: SWFs prefer to target sectors which
Page 25 and 26: A vast majority of LPs conduct due
Page 27 and 28: There is room for improvement with
Page 29 and 30: Focus on… Endowments Distribution
Page 31 and 32: Strategy Appetite institutional inv
Page 33 and 34: institutional investor sentiment su
Page 35 and 36: The prevalence of zombie funds has
Page 37 and 38: Private equity is coming under incr
Page 39 and 40: Fundraising by Strategy 150 institu
Page 41: Published in July 2012 by PEI Secon

INSTITUTIONAL INVESTOR SENTIMENT SURVEy - PEI Media

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