Round two

ILPA, the LP-focused industry group, plans to issue new guidelines for capital calls, distribution notices and portfolio company quarterly reports. The initiative comes exactly one year after ILPA’s Private Equity Principles were released.

The Institutional Limited Partners Association is gearing up for a new set of guidelines, its first in a year. The trade group is planning to release a set of financial reporting standards in November intended to increase uniformity and transparency in information provided to LPs.

What will this mean for the industry? LPs continue to win more favourable terms and conditions, as well as transparency concessions.

The reporting principles roll-out will include new guidelines for capital calls, distribution notices and portfolio company quarterly reports. The ultimate goal is to “create consistency, accuracy and expediency in partnership financial reporting”, according to an ILPA statement.

As the trade group preps new guidelines, private equity managers are still digesting the last round.

The ILPA Private Equity Principles were unveiled exactly one year ago. The guidelines suggested a host of private equity partnership terms and conditions that the members of ILPA believed best align the interests of limited partners and general partners.

The principles have received mixed reactions in the private equity market, with some GPs openly supporting them and others privately claiming they are unreasonable and may amount to investor “collusion”.

The ILPA principles stipulate that: no carry should be taken on current income; clawback amounts should be gross of taxes paid; and deal fees should go 100 percent toward the “benefit of the fund”, among other rules.

These guidelines have gained unmistakable traction.

In a separate story this week, PEM wrote that a tighter fundraising environment has provided LPs greater say in designing management fees, clawback provisions and fee offsets, according to a study by New-York based law firm Debevoise & Plimpton.

The study found post-crisis funds showed a notable decrease in management fees after an investment period had concluded. This reduction in fees was long-demanded by LPs and included in ILPA’s guidelines, which argue reduced management fees following a wind-down of a fund’s investment period was a reflection of lower operating costs.

An industry group has previously tried to bring greater consistency to GP reporting. In 2005 the Private Equity Industry Guidelines Group released “Reporting and Performance Measurement Guidelines”, which among other things suggested a format for communicating with investors.

The difference today is ILPA may have the muscle to make GPs pay closer attention.