Siguler: Reluctant LPs should be ‘beaten over the head’

Limited partners who discourage private equity fund managers from making investments in order to avoid facing capital calls should be sued, and more figuratively “beaten over the head”, according to George Siguler, the founder and managing director of fund of funds group Siguler Guff.

LPs are fiduciaries for every other LP in the fund. George Siguler

“LPs are fiduciaries for every other LP in the fund,” Siguler said during a panel discussion at The Emerging Markets Private Equity Forum in London this week. “Nobody makes money on un-invested capital.”

As a manager of both funds of funds and direct private equity funds, Siguler Guff acts as both LP and GP. Siguler was reiterating a point raised by Richaird Laing, the chief executive of prominent emerging markets LP CDC Group.

Laing had noted the misalignment that exists among many funds’ LPs, whereby some are willing and able to meet capital calls, while others are less liquid and do not want to face a call for money. “Some LPs will wonder why [GPs] are not investing right now,” said Laing.

George Siguler

The panel, which also featured Tom Gibian, the chief executive officer of Emerging Capital Partners, and Steven Wisch, managing director of India Equity Partners, also discussed the need for GPs to engage local professionals with the skills to manage businesses through a downturn.

“We have become big customers of search firms,” said Gibian, “particularly on the controls and finance side”. Emerging Capital Partners is a Washington DC-based private equity firm that makes private equity investments across Africa.

Siguler also warned GPs not to get too heavily involved in portfolio company management. “GP value-add is overrated,” he said. “The skills to run a pharmaceutical company cannot be learned in four years at Bain and Merrill Lynch”. He went on to stress the importance of hiring experts at a local level.