When ex-Morgan Stanley chairman Sir David Walker drew up a list of guidelines in late 2007 covering private equity, it was with the intention of moving the industry toward greater transparency in the UK. Close Brothers, 3i, Advent International and Warburg Pincus were among the players who signed up to the Walker Report, which called for firms to reveal more about their investment strategies, management teams and portfolio company details to the public.
However, just half of the 32 firms which have agreed to adhere to the guidelines have disclosed the recommended level of company information during 2008, according to a report by the independent Guidelines Monitoring Group. The survey, the first of its kind since the Walker Report went into effect, showed that such firms have failed to publish an annual review and release investment approach and company information into the public domain via company websites.
Only three quarters of the firms provided “a categorisation of the limited partners in the funds or funds that invest or have a designated capability to invest in companies that would be UK portfolio companies”.
However, although not all the participating firms have been one hundred percent compliant, the group said it was confident that significant progress in disclosure had been made. Firms adhering to the Walker recommendations include private equity giants The Blackstone Group, 3i and Kohlberg Kravis Roberts, while Guy Hands' Terra Firma went the furthest by reporting on all eight of its portfolio companies, even those that didn't fall under the guidelines.
Such enhanced disclosures though have also resulted in higher costs in dollars and manpower for such firms, with Terra Firma spending €325,000 to meet its information commitments. As returns in the industry have fallen many firms may be placing their spending priorities elsewhere.
This was the first year in a process where best practice will evolve over time,” the report stated. “The efforts made by the private equity industry so far are therefore encouraging, but improvement in some areas is both possible and necessary.”