A tangled web

Our review of fund manager websites shows that GPs are still struggling to get the balance right between transparency and over-disclosure.

For private fund managers, websites can be both friend and foe.

On the one hand, it’s a great way for private fund professionals to showcase their work, helping them grab the attention of prospective investors, job-seekers and management teams. Five years ago, you would have had a hard time finding any specific fund information on GPs’ websites, but these days more and more are peeling back the curtain to web browsers, recognizing that it's a useful way to build the brand.

However, the compliance team is no fan of the trend. As the industry becomes more institutionalized and open to the wider public, CCOs are nervous that regulators like the SEC could interpret a website that discloses lots of data about a fund as an invitation to invest (which breaks private placement rules).

So how are these two competing forces influencing the amount of portfolio company data GPs are sharing online?

We've been studying the websites of 60 private equity and real estate managers, making sure to keep an even mix between the big players and those operating at the smaller end of the market. Firms were categorized alongside a sliding transparency scale that ranged from no mention at all of fund assets, to acquisition dates, right through to disclosing portfolio metrics like IRR, EBITDA, sale price, etc.

The good news is that 85 percent of firms now include at least some portfolio information online. But at the other end of the scale, only 8 percent of GPs disclose specific portfolio company performance data. And those few that did were pretty selective about which portfolio assets were scrutinized in more detail. That's a brave approach, since SEC inspectors may take issue with performance figures that have been cherry-picked for general consumption.

Another significant finding was that large private equity firms tend to fall at the more transparent end of the spectrum. Of the top 15 biggest private equity shops (as determined by the PEI 300), all provided some level of information on their portfolio companies (Carlyle even goes so far as to mention which funds hold which assets). That's partly a reflection of how strong the legal and compliance teams tend to be at these shops. But since others do tend to lead where they follow, it does suggest that we can expect the trend towards greater transparency across the industry to continue.

It was a different story for real estate firms, though: only nine firms in the top 15 of the PERE 50 include any info at all about their assets, suggesting that norms vary widely between different strategies.

As for the smaller GPs – well, it's fair to say that they're all over the map. Some mid-market players provide limited data, like whether assets are current or realized; some go into their value-add approach to certain investments; some, as you'd expect, are completely silent on the subject.

The bottom line, as far as we can gather, is that although GPs are clearly getting more comfortable about disclosing portfolio data, there's still no real standard emerging in terms of exactly how much information should be disclosed. So unless and until the regulator decides to be a bit more prescriptive, marketing teams and compliance staff are going to have to fight it out between themselves in an effort to get the balance right.