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SEI Survey: Private Equity Managers Struggling to Keep Up with Increasing Investor Transparency Demands

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While nearly everyone in the private equity space agrees that there has been an increased focus on portfolio transparency and client reporting over the past few years, investors remain dissatisfied with the information they receive from managers, according to a global survey report released today by SEI in collaboration with Greenwich Associates. Less than half of investors polled (43 percent) said they currently receive all the information they would like from their private equity managers. That number dropped to 10 percent when the same question was asked of consultants. Conversely, 85 percent of fund managers feel their investors currently receive all the information they need.

The survey report, “Searching for Alignment,” compiling results from more than 400 institutional investors, consultants, and fund managers, revealed that managers sense investors’ concerns, as 45 percent said that satisfying investors’ expectations is their firm’s greatest operational challenge. The survey also suggests that managers are largely meeting expectations when it comes to basic transparency expectations. However, while 75 percent of managers see industry and sector reporting data as most important, 75 percent of investors and consultants seek more information on areas such as the leverage used in the fund and volatility statistics.

“In the Era of the Investor£ managers who continually strive to fulfill investor expectations will lead the pack when it comes to raising and retaining assets,” said Philip Masterson, Senior Vice President and Head of Business Development, Europe, for SEI’s Investment Manager Services division. “Managers’ reporting efforts have come a long way in recent years, but it’s clear from the survey that investors’ needs are evolving and they still want more. By satisfying investor expectations, managers will become trusted advisers and will deepen their relationships.”

The survey report points to a “growing disconnect between private equity managers and investors on the depth and type of reporting data necessary despite continued growth in sector assets. Private equity managers need to direct their focus and efforts on the client service front in order to keep up with investor needs,” said Rodger Smith, Managing Director of Greenwich Associates.

The survey also revealed that most managers polled (81 percent) are making investments in operations, with the reason most frequently cited being increasing firm efficiency, followed by enhancing compliance and risk management, and attracting new investors/clients. While there is some disparity on transparency expectations, managers and investors agree that finding quality investment opportunities is the most significant challenge facing the private equity industry over the next 12-18 months. Investors and consultants are also very concerned with the prospect of poor performance, as nearly three quarters of those polled (73 percent) said poor performance is one of their top 3 concerns about private equity investments. More than half of those polled (53 percent) pointed to failure to achieve the primary investing objective as one of their top 3 concerns about private equity investments, while nearly a third of those polled (31 percent) listed the level of fees in their top 3 list.

The survey report is the second in a three-part series published by the SEI Knowledge Partnership, which provides ongoing business intelligence to SEI’s investment manager clients.

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