Adveq completes SAS 70 audit

Private equity fund of funds manager Adveq has successfully passed a SAS 70 Type II examination, making it one of the few but growing number of firms that have gone through the thorough and expensive audit.

A SAS 70 audit is essentially a third-party audit of an organisation’s internal controls, particularly regarding those parts of the organisation that have custody of client assets or information. While SAS 70 has been around for decades, until recently most private equity managers rarely performed this type of review.

This may be starting to change, as last year Capital Dynamics and HarbourVest, which manage assets of $20 billion and $30 billion respectively, both underwent the audit. Adveq, which has offices in New York, Zurich, Beijing and Frankfurt, manages assets of around $4 billion for clients including pension funds, insurance companies and other financial service providers.

A SAS Type I report verifies that controls are in place as of a certain date. Adveq says at the beginning of 2009 it successfully passed a Type I examination of its operational procedures and controls related to its investment management services and operations as of 31 December, 2008.

It subsequently entered into a more rigorous SAS 70 Type II examination – conducted by PricewaterhouseCoopers – which covered the firm’s investment management, fund administration and information technology practices from 1 June, 2009 to 30 November 30, 2009. A Type II audit is usually carried out annually and takes several weeks or more to conduct, while the cost of both types of audits can total $100,000 each.

While few firms have traditionally taken on this expense in both time and money, LPs are increasingly demanding that private equity firms undertake SAS 70 audits to in part demonstrate transparency and to make their own audits easier. It’s also a good way to reassure investors in a post-Madoff world.

“We recognise that risk management for return generation is one of the main concerns of clients in the current market environment, and believe that this external recognition for Adveq’s commitment to ensuring best-practice internal controls and procedures provides important reassurance,” Philipp Bucher, managing director and chief financial officer, said in a statement.