PE's fee reporting conflict: to standardize or customize?

At PEI’s CFOs and COOs Forum last week, several delegates voiced opinions on the ongoing challenge of serving individual relationships with LPs.

Amid an already tough push for standardization in data reporting throughout private equity, LPs are now also increasingly customizing their demands to GPs, according to market participants attending Private Equity International’s 14th annual CFOs and COOs Forum in New York last week.

The fee reporting template – published by the Institutional Limited Partners Association (ILPA) in January 2016 in an effort to standardize the way in which GPs share fee and expense information with their investors – continues to be unpopular among the private equity community.

At the CFOs and COOs Forum last year, 23 percent of attendees viewed the template as a positive development. This year, a poll conducted at the forum found that only 12 percent of attendees said they are fully adopting the ILPA template, while 36 percent said they are not planning on adopting it and 30 percent are opting for a modified adoption. 

A delegate at the conference, who works at an asset manager with more than $2 billion in assets under management, noted that her firm considers the ILPA fee reporting template merely a guidepost. 

“We don’t follow the exact template,” the asset manager said. “At the end of the day, we are all different.”

Another delegate at a fund of funds noted that adopting the ILPA fee reporting template is a long-term process.

“We’ve been adopting the ILPA template as a consistent standard with limited success,” he said. “It’ll take time.”

Meanwhile, LPs have specific demands as they become more granular in the type of data they are requesting.

“We get different questionnaires from different LPs, at different time intervals, from semi-annual to annual,” said a Washington-based GP attending the conference. “Some LPs want to know every process we have, and we have some LPs coming in more often than others who visit every three or four years.”

LPs are not the only ones heading toward greater customization. GPs are also tailoring the access to and the presentation of their data, making it more complicated for LPs.

“What you might not realize is that LPs have 300 passwords, logging in separately for different managers’ data. It has to stop,” the fund of fund manager said. “One ILPA member said it was easier with fax machines because he had just one place to go. Now it’s much more complex.”

Ultimately, several delegates said that GPs and LPs should try to work together and be understanding of the specific needs of each party. One investment advisor reminded other that a one-size-fits-all approach is not the correct way to operate.

“There's never going to be one solution for everyone,” said the GP. “This has become more of a partnership and that's going to continue to evolve.”