Hamilton Lane’s newly appointed EMEA head has called for greater openness in private equity to combat criticisms of its licence to operate.
Richard Hope, who was promoted to the position last week in addition to overseeing the $481 billion investment manager’s London office, said the industry needs to embrace the spirit of transparency.
“Private equity historically was considered to be a black box,” Hope told Private Equity International in an interview in London. “I think, increasingly, LPs want to understand what’s inside that black box, the way private equity firms manage investments and the ‘good citizen’ part of that in terms of owning those businesses.”
Private equity’s reputation has come under the spotlight in recent months, most notably from US senator Elizabeth Warren, who has compared the industry to “vampires” who bleed companies dry and walk “away enriched even as the company succumbs”.
Better transparency around investments and ownership is crucial, Hope said.
“Investors really need to understand what’s going on with their private markets portfolios, from the big private equity firms down to the smaller ones,” he said. “What money do they manage? Who do they manage it on behalf of? What do they own? What are they doing with those businesses? Are they doing the right thing for those businesses? The tax discussion is one part, and the other is private equity acting responsibly.”
The burden falls upon GPs to prove their value and it is not LPs’ responsibility to defend GPs, Hope added.
“I think GPs need to engage with the relevant authorities to have a discussion around these issues,” he said.
Hope replaced managing director Jim Strang, who assumed the newly created role of chairman EMEA. Strang will focus on the firm’s primary fund investing business, relationship management and business development.
Hope joined Hamilton Lane’s investment team in 2011, becoming managing director of EMEA secondaries and co-investments in 2016. Prior to that he worked at Alliance Trust Equity Partners, an Edinburgh-based private equity firm.
Asked whether increased regulation was around the corner as a result of heightened scrutiny on the industry, Hope said it was a sign the private equity industry is becoming more relevant.
“It’s not the cottage industry it once was,” he said. “This idea that it is niche and small isn’t true anymore. It’s a proper institutional asset class, and because of that, private markets are becoming part of daily conversation.”