A year after tackling fund terms in its private equity principles, the Institutional Limited Partners Association has its eyes on financial reporting standards. The trade organization, which represents institutional investors in private equity, plans to roll out a new set of financial reporting standards aimed at improving “uniformity and transparency in financial information provided to private equity investors” in November.
Transparency and consistent reporting has always been a point of contention between LPs (Limited Partners) & GPs (General Partners). According to a release issued by ILPA, the organization will offer new “templates for capital calls, distribution notices and quarterly reporting of portfolio company financial information that will help create efficiencies and reduce expenses in administering and monitoring private equity investments.” ILPA hopes the new guidelines will provide “consistency, accuracy and expediency in partnership financial reporting, performance attribution and overall partnership activities.”
ILPA said that it has worked with a number of GPs to develop the concepts and content of these documents, and will introduce the first part of a new set of financial reporting standards in November. The ultimate goal of the new reporting package is to create consistency, accuracy and expediency in partnership financial reporting, performance attribution and overall partnership activities, the trade body added.
ILPA Principles are fast gaining currency with 130 organisations already endorsing them. A recent survey by Preqin, a London based agency which tracks fundraising globally, says, 13% of LPs would dismiss an opportunity to invest in a fund based solely on its non-adherence to the Principles, and a further 58% said that they would see this as a potential reason to not invest.
However, the general consensus is that alignment of interest problems have been less pronounced in emerging markets than in developed markets. Also, emerging markets are seen to be more willing to accept and adapt to the shifting LP-GP dynamics.