The global private equity industry continues to suffer as a result of fund managers’ inability to communicate, according to a new study from UK-based consultancy Pivot Partners.
The survey found that 77 percent of limited partners felt that GPs could communicate better with LPs, while 86 percent believe that private equity has a poor reputation with the general public. “GPs and their stakeholders recognise that both the industry’s reputation and the communication practices of individual funds require urgent attention,” the study said.
LPs cited a number of factors that have contributed to private equity’s poor public reputation in recent years, including The Blackstone Group’s investment in Southern Cross, Terra Firma’s investment in EMI, Mitt Romney’s US presidential campaign and the “Occupy” movements in the US and UK. The study analysed responses from 135 LPs, 107 GPs, 115 business owners and management teams and 111 corporate finance advisers. Also included in the sample were 52 members of the international, business and trade press covering private equity and related matters.
“The public tends to bundle private equity managers in with bankers. Hence, the reputation for inflated salaries, and inflated self-importance, gambling and asset–stripping prevail,” said a European venture capital professional quoted in the study.
80 percent of LPs said they find it difficult to locate useful, relevant information about GPs and their team members online and that 53 percent of GPs do not provide a dedicated LP reporting panel on their website.
While many in the industry would argue that the public’s perception of private equity has changed for the better lately, only 37 percent of LPs felt that private equity’s reputation had improved in the last five years; 62 percent felt there had not been any significant improvement.
One of LPs’ main criticisms is that GPs only communicate with investors during the fundraising period and that there is a “lack of transparency when the LP has not yet committed”, according to the study.
Items included on LPs’ “wish list” include a secure online portal on GPs’ websites, more contact with GPs outside of fundraising and the availability of more details on the performance of the portfolio, the study said.
Less than half – 47 percent – of the 300 GP websites Pivot analysed had a link to a dedicated LP reporting site. While some GPs have used social media to improve communications with LPs, 64 percent of GPs do not have a social media policy for staff, and the majority of those that do not – 66 percent – have no plans to introduce one, according to the study.