As a way to help both GPs and LPs, the Institutional Limited Partners Association has issued the first of five reporting templates to improve “uniformity and transparency and reduce expenses in administering and monitoring private equity investments”.
The first template focuses on capital calls and distribution notices and was developed in consultation with general partners, ILPA said in a statement.
The capital call and distribution notices template can be accessed here. ILPA is requesting feedback about the template and hopes to publish the four remaining templates, which will deal with issues like quarterly and annual reporting, in the next few months.
ILPA chose to tackle capital calls and distribution notice reporting because it was an issue on which both general partners and limited partners asked for help, according to Kathy Jeramaz-Larson, ILPA’s executive director, who spoke during a media call Tuesday. “[This was an issue] where the industry was looking to create some efficiencies on the LP and the GP side,” she said about the first template.
ILPA kicked off its efforts at standardising and simplifying reporting last fall, with the ultimate goal of creating “consistency, accuracy and expediency in partnership financial reporting”, ILPA said at the time. The industry trade organisation published a list of Private Equity Principles in 2009 that were meant to help LPs and GPs improve governance, transparency and alignment of interests.
Reporting – generally speaking, the information a GP shares with its LPs about the fund performance and investments – has long been an area of concern for LPs. Complaints about reporting have ranged from the quality of information the GP provides to the amount of information shared.
The information you need to deal with a capital call notice is more detailed than you realise. It can be a significant back office headache to appropriately address the information.
“From a GP’s point of view, you get less calls from LPs. You shouldn’t have 50 people saying, ‘I need it in this format,’” the LP source said. For LPs, especially those organisations with small private equity teams, having standardised reporting will definitely ease some pressure, the source said. “Having things standardised makes it easier for smaller teams to understand the information and process it,” the source added.
Specifically, reporting around capital calls and distributions is more than just providing the amount of the capital call or the distribution, according to Tim Recker, chairman of ILPA, who also spoke during Tuesday’s media call. “The information you need to deal with a capital call notice is more detailed than you realise,” Recker said. “It can be a significant back office headache to appropriately address the information.”
ILPA this week also released an updated version of its Private Equity Principles that includes more information about carry clawback best practices, increased clarity and descriptions of the three existing guiding principles – transparency, governance and alignment of interests – and expanded context around the purposes of key guidelines.