The Institutional Limited Partners Association (ILPA), whose several hundred members control the vast majority of commitments to private equity funds around the world, has unveiled the first part of its long-awaited second round of reporting guidelines.
The first round, of course, was its Private Equity Principles, which were published in November 2009 and suggested a host of private equity partnership terms and conditions that the members of ILPA believed best align the interests of LPs and GPs.
This round is comprised of five sets of reporting templates to help simplify and standardise reporting. ILPA has unveiled the first set, which covers capital calls and distributions from private equity managers. The four remaining sets of templates ILPA plans to issue in the next few months will address quarterly and annual reporting.
So what does this first set mean for the industry?
With the aim to help both GPs and LPs, ILPA issued the templates to improve “uniformity and transparency and reduce expenses in administering and monitoring private equity investments”, it said in a statement.
A New York-based lawyer told PEM that LPs are becoming increasing frustrated with different formats. “It’s time consuming and expensive to process all these numbers. Imagine what some of the larger LPs see on a quarterly basis,” he said. “It’s hard to believe it’s taken this long to get a standard process in place.”
LPs want information presented in a clear and uniform manner, which is something most GPs should also embrace. Standardisation will mean GPs will get fewer calls from frustrated LPs, and spend less time delivering ad hoc (or bespoke) reports. And the relationship between the two parties will potentially become even stronger, with less need to question GP reporting or scramble to meet LP requests.
For that reason, the industry should welcome ILPA's templates. Standardisation may appear to be a headache to some at the outset, but the long-term benefits far outweigh the hassle of amending some reporting procedures.