Reporting Standards, the Talk of the Town at the Private Equity International CFOs & COOs Forum
24 February 2017
A hot topic at the recent PEI CFOs & COOs Forum was the debate over whether or not a financial reporting standard will take root across the private equity industry. “Standardization” was on the agenda last year, too, so not much has changed. A year later, the private equity industry is at standstill – many are eager for standardization and are waiting for a consensus solution.
What’s holding standardization back? In the first place, Limited Partners (LPs) have different requirements as to how they can receive information from fund managers. More sophisticated LPs want to be able to quickly compare and analyze data in XML format, while smaller LPs don’t have the technology to ingest anything other than PDFs.
Second, many investment strategies don’t easily translate into all of the suggested standard reporting metrics. Some may require footnotes to explain the data, and others may necessitate modifications to the output to better report on the performance of underlying investments.
Finally, adoption of the Institutional Limited Partners Association (ILPA) standardized reporting templates is not feasible for all private equity firms. Smaller, resource constrained General Partners have concerns that the ILPA requirements are both too burdensome and too costly to implement. An audience poll conducted at the PEI CFOs & COOs Forum suggests only meager adoption of the standardized reporting template:
How does your firm intend to implement ILPA standardized reporting templates?
- 12% - full adoption
- 31% - modified adoption
- 22% - for certain LPs
- 35% - no adoption
Standardization is important – there’s no question about that. LPs need to be able to better analyze their portfolios and GPs need to be able to avoid ad hoc information requests. With awareness increasing from all sides, the private equity industry will likely shift to a standardized model eventually (and you can already start to see that paradigm shift in alliances like AltExchange and the conversations heard at the PEI CFOs & COOs Forum). In getting there, the question centers around strategy and what it will take to meet the multitude of requirements for different businesses.
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As Director of Strategy and Product Marketing for Intralinks, Meghan McAlpine is responsible for the go-to-market strategy and driving the growth of the company’s Alternative Investments solution, the leading communication platform for private equity and hedge fund managers and investors.
Prior to joining Intralinks, Meghan worked in the Private Fund Group at Credit Suisse. While at Credit Suisse, she raised capital from institutional and high net worth investors for domestic and international private equity firms.