Compliance and IR team up to meet LP demands

Compliance and investor relations executives spoke at PEI’s Investor Relations & Communications Forum this week about how they were working together to expand LP communications and navigate the regulatory landscape.

The increase in limited partner demands and new regulatory requirements have investor relations and compliance teams working more closely than ever.

Speakers at PEI’s annual Investor Relations & Communications Forum in New York this week stressed it takes some time to develop a strong working relationship between compliance and investor relations teams.

“My style has been to explain the rules to the investor relations team instead of just saying ‘you can’t do this’,” according to one chief compliance officer, who spoke on a panel at the conference.

And that could be anything from reviewing marketing materials to explaining political contribution policies and lobbying rules.

Navigating the lobbying and gift rules takes a tremendous amount of time – the rules are often nonsensical and vary by state, even by city.

Jason Ment

“New lobbying rules have many compliance officers nervous,” said the compliance officer. “We require pre-approval for political contributions and our policy extends to employee and spouse.”

Jason Ment, general counsel and chief compliance officer for private equity consultant StepStone Group, said during the panel discussion the firm bans political contributions outright, but “navigating the lobbying and gift rules takes a tremendous amount of time – the rules are often nonsensical and vary by state, even by city”.

Meanwhile, LP requests for more frequent and specific information from GPs forces the compliance and investor relations teams to work together as well.

“There are a number of common information requests and they are getting more specific,” said one investor relations officer on the panel. “We’re being asked by LPs to share more valuation information. We are asked about expected IRR, what we thought the current investments to date are expected to yield.”

Speakers also said there was more focus on the operating side of the business.

“LPs want to know how you are adding value,” said the investor relations executive. “One of the ways that a lot of LPs I deal with, they ask about value attribution analysis. LPs want to know what you grew in excess of industry growth. But it can be challenging to break it all out. For a mid-market fund to go deal by deal, it’s a huge undertaking.”