PE sponsors turn to new funding for portfolio companies’ growth; How the SEC’s audit proposal could impact private funds

PE sponsors make novel play to help portfolio companies weather volatile market; The SEC’s audacious proposal: how it could upend industry practices.

Private equity sponsors are looking to insurance collateral funding to boost IRR and help portfolio companies fund growth. The funding allows PE sponsors to repatriate capital faster and extract better returns from their portfolio companies, writes Jennifer Banzaca.

In this edition’s cover piece, Bill Myers and Jennifer Banzaca look at how the SEC’s proposed audit rules for private funds could deal a crushing blow to the industry.

While SEC commissioner Gary Gensler has said the proposed rule is necessary to “increase efficiency, transparency and competition” in the private funds market, industry proponents say it would be disastrous for private funds.

Among the concerns about the proposal, the auditor independence mandates would mean private funds could no longer pay for surprise mock Custody Rule exams in lieu of audits, driving up costs for every company, not just funds.

Opponents also worry that, if adopted, the audit rule would restrict an investor’s ability to negotiate better deals on behalf of their beneficiaries via side letters, preventing them from investing in private funds.

Email prepared by Jennifer Banzaca