Information requests from investors have been on the rise for years. Managers are struggling, and signs are that the deluge is only going to get heavier, said panelists at the CFOs & COOs Forum in New York last week.
And things could get more challenging if the SEC adopts its proposed rule to provide investors with quarterly investment statements with standardized disclosures about such things as fund fees, expenses and returns. Under the proposal, managers will be required to provide these quarterly statements within 45 days of each calendar quarter end. Even if the final rules are different than the proposal, both regulator intent and the continuously expanding investor base point to a heavy workload for those dealing with investor requests.
But CFOS at Private Equity International’s event last week said their plates are already full.
“The information requests we get from investors these days are getting more detailed,” said one panelist. “Then you have the SEC proposal,” the panelist added, which puts an additional layer of disclosure requirements “that are going to be very time consuming for managers.”
It’s not just institutional investors that are demanding more, and more detailed, info. The democratization of private equity to retail and a wider array of qualified individual investors is also fueling the fire, particularly because investors acting on behalf of retail clients want the same data they get from money market funds, including transparent and consistent reporting of fees and expenses.
One CFO said that individual investors, such as high-net-worth individuals, require much more servicing than institutional investors. “I feel like we spend more time servicing high-net-worth individuals and appeasing them in their request for information than we ever did for the large institutions,” that CFO said.
Only several years ago, investors would have been lucky to receive a detailed capital account statement, panelists noted. It’s a different world now, and managers have to vet requests to ensure they are relevant, so as not to put further onus on already heavily burdened departments.
“When we get very specific data requests, we have to ask why the investor needs that information,” one panelist noted. “Once we understand what somebody’s going to do with the information, why they need it, then we can find out the right way to record it.”
Many managers are already providing investor reports annually, and they tend to delve much deeper, analyzing portfolio companies and providing portfolio performance commentary.
“If a portfolio company is struggling, the report will talk about why, and the steps that are going to be taken to hopefully improve things and get the company back to growth,” one of the panelists noted.