GPs: Compliance ‘difficult, time consuming’

Private equity managers cited difficulty complying with new regulations, according to a KPMG survey. Managers also reported a dim view on the economy and the fundraising environment.

More than half of the private equity managers surveyed by KPMG reported that complying with new regulations is a “difficult, time-consuming process”.

KPMG, which surveyed 150 managers, found that 51 percent of respondents thought complying with new regulations was difficult. Thirty-one percent described the process as “mildly intrusive”, and 17 percent said it is a non-issue.

When asked what area of regulation most impacted the private equity industry, 42 percent named the Dodd-Frank Act, while 31 percent said political indecision concerning the debt crisis. Fourteen percent said healthcare reform.

“Now that there is greater clarity around regulatory changes, it's not surprising that more PE executives are finding the regulatory process more difficult than previously thought,” said Marc Moyers, national sector leader for KPMG's US private equity practice in a statement. “Even the large PE funds that had compliance processes in place are finding that they need to add dedicated resources to regulatory compliance, which has become yet another cost of doing business in this industry.”

Compliance was not the only challenge cited by private equity managers.

Fifty-seven percent of the managers surveyed said the US economy will remain stagnant in the near future. While 23 percent said that a double-dip recession is likely, 20 percent expect to see improvement in the economy next year.

Meanwhile, managers were split when asked about fundraising, with 36 percent saying they would be less confident about the prospect of raising a fund today than they would have been a year ago, while 35 percent said they would be more optimistic than a year ago. Thirty percent of managers said they felt the same about the market as they did last year.

Regarding sectors, 38 percent of managers said that energy will be the most attractive industry to invest in next year, 19 percent said healthcare, 15 percent financial services, 14 percent social media and 13 percent cited real estate.

Brazil was voted the most attractive region to invest in outside of the US by 33 percent of those surveyed, followed by China (28 percent) and India (16 percent).