The European Venture Capital and Private Equity Association is currently working on a set of guidelines which, like the Institutional Limited Partners Association Private Equity Principles, will set out LP-focused best practice guidelines on a number of industry issues.
EVCA has already “reached out” to ILPA in developing its guidelines, said Klaus Bjørn Rühne, a partner at Danish investor ATP Private Equity Partners, in an interview. Rühne is also chairing EVCA’s recently formed LP platform.
The ILPA guidelines, introduced last year to provide “best practices” for the terms of private equity funds, have received mixed reactions from GPs, varying from full support to accusations that they represent LP collusion against GPs.
ILPA is a pure pension fund-oriented LP platform and they have produced some very interesting guidelines that in many regards make sense.
Klaus Bjørn Rühne
ILPA’s membership comprises 220 of the most influential private equity investors in the world, who together control around $1 trillion in commitments to funds around the globe.
Among the guidelines put forth by ILPA were that LPs should be repaid first on all contributed capital plus a preferred return before GPs get carried interest, clawbacks should be gross of taxes paid, management fees should “step down significantly” once a follow-on fund is formed and deal fees should go completely toward the benefit of the fund. They also call for limited partners to be given stronger rights to suspend, terminate or dissolve a fund.
EVCA’s guidelines will take a more “middle road” approach to fund terms than ILPA’s guidelines, reflecting the organisation's mix of LPs and GPs as its members.
“ILPA is a pure pension fund-oriented LP platform and they have produced some very interesting guidelines that in many regards make sense,” said Rühne. “It would be fair to say, however, that there can be discussions around some of these guidelines to find a middle road more collaboratively.”
EVCA’s LP platform is working together with the association’s GP members, to “form a view together so that guidelines make sense for all involved.”
Progress on the guidelines is ongoing, but Rühne declined to comment specifically on the timescale.