ILPA European Tour 22-26 JUNE 2015 AMSTERDAM, COPENHAGEN, LONDON, - - PowerPoint PPT Presentation
ILPA European Tour 22-26 JUNE 2015 AMSTERDAM, COPENHAGEN, LONDON, PARIS The Membership Committee remains focused on cultivating a diverse global membership. Our newest members represent 6 continents and range all across investor types.
22-26 JUNE 2015
AMSTERDAM, COPENHAGEN, LONDON, PARIS
318 ORGANIZATIONS
“The Membership Committee remains focused on cultivating a diverse global membership. Our newest members represent 6 continents and range all across investor types.”
Robert van Schaik, SHELL - Membership Committee Chair
384 OFFICES WORLDWIDE OVER 2,300 INDIVIDUALS 68 EUROPEAN
Chairman of the Board Board of LPs Membership Committee Industry Affairs Committee Education Committee GP Summit Committee RB & S Committee
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European Members by Type
United States 62%
Europe 15%
Canada 11% Asia 4% Middle East 3% Oceania 2% South America 2% Africa 1%
Members by Region
Corporate Pension 29% Public Pension 29% Endowment 4% Family Office 11% Other 9% Insurance 18%
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MEMBERS-ONLY CONFERENCE
REGIONAL EVENTS
Save the Date! June 7–9 2016 in Chicago
16 Events around the world each year
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GP Summit: LP-Only Day Nov. 3rd One-day Professional Development Seminar: Decision Making Strategies ILPA Executive Education returns to Europe in September: Level I and Level II Module 3 – first time in London Workshops catered to ILPA members: Coinvestments, Secondaries, End of Life Issues
Next Webcast: Buyouts - Pricing and Leverage: Where Are We in the Cycle? Upcoming: ESG
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Annual Survey of Limited Partner compensation – Now LIVE
Support Peer Compensation Benchmarking Individual Responses Remain Anonymous View 2014 Results in our Document Library
Answer online @ ilpa.org/compsurvey
Compensation Trends available on:
Experience levels, Organization Types, Geography
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Source: 2014 ILPA Compensation Survey – Respondents’ private equity experience by position (25th, 50th, 75th percentiles). Number of respondents per position in parentheses (n)
CIO / SVP Director of PE / MD / VP Sr Portfolio Mgr Portfolio Mgr Core Services Mgr / Compliance Ofc Sr Associate / Investment Ofc Associate Analyst Core Services / Compliance Analyst
$ $100k $200k $300k $400k $500k $600k
Median Compensation by Position*
Public Pension - Base (148) Public Pension - STIP (61) Public Pension - LTIP (17) Not a Public Pension - Base (151) Not a Public Pension - STIP (113) Not a Public Pension - LTIP (45)
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Create custom benchmarks
‘Slice & Dice’ the ILPA Private Markets Benchmark Generate returns in over 20 currencies
Members can access the Calculator for only $5,000/yr. ($20,000 discount) by contributing their fund list to ILPA
Other Influencers PE Associations
Regulators
Policy Makers
Communicate with Media
FT, PE News - Dow Jones, WSJ, PEI, PFM, FundFire (FT), PE Hub, Reuters, The Hill, Roll Call
Network Global PE and VC Associations
US: ACG, NVCA, PEGCC, SBIA EU: EVCA, BVCA, NVP, DVCA, AFIC, AF2I, LPEA Global: ColCapital, AMEXCAP, LAVCA, ABVCAP, EMPEA
Advise National and Global Regulators
US: SEC Examinations & Enforcement, Dept Labor, Treasury EU: ESMA, AMF, FCA Global: Financial Stability Board
Educate EU and Member States Government
EU: European Commission, Parliament/ECON Committee members
US: None to date Aligned Global Public Interest Associations
US: SIFMA, NASAA, CII, AFL-CIO, IIF, CFR, US Chamber, FSR, AFR, PREA, CEIBA EU: NAPF, Dutch Federation Pensions Global: Institutional Investors Roundtable
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Educate Stakeholders on the Role of PE in Investor Portfolios Promote Prudent Regulation
Influence Disclosure and Registration Requirements
Shape Broader Financial Market Reforms
Understand the Impacts of Comprehensive Tax Reforms
Explain PE’s Broader Role within Economic Policy
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Meeting Scheduling System
revamped in 2014 to ensure compliance with European fund marketing requirements; European LPs receive early access to make GP selections (i.e., reverse solicitation)
Theme is “Distressed and
Special Situations”
Keynote: Billy Beane of
Moneyball fame
LP-Only Day: ILPA AGM,
Professional Development Seminar and LP-Only Dinner (sold out 3 years in a row!)
Professional Development
Seminar: Decision Making Strategies presented by George Wu, University of Chicago Booth School of Business
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2015 in Pasadena a huge success. 170 LP only attendees, spanning 101
9 workshops, past years’ workshop content
available on ilpa.org
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Institute in Europe
Join us in September for two of
Courses:
September 14-16 Level I September 17-18 Level II
Module 3: Executing LP Roles and Responsibilities – first time being offered in Europe Description for both courses can be found on ilpa.org
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Unifying implementation and enforcement of current regimes
and reducing barriers across member states.
The preservation of National Private Placement Regimes
(NPPRs) alongside a proportionate and workable third country passporting regime is essential to ensure EU investors can continue to access access top global non-EU funds.
Greater EU-wide research on the true risk of long term and
illiquid investment is needed to inform prudential regime requirements under Solvency II and IORPD.
Crafting investment vehicle-neutral tax incentives that do not
promote funds to the detriment of direct investments, or vice versa.
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Somewhat positive, 14% Neutral, 23% Somewhat negative, 29% Extremely negative, 23% Not sure, 11%
What impact have AIFMD registration requirements had on investor protections for European limited partners?
Source: 2014 ILPA Members Survey on AIFMD and Proposed Third Country Passport
Yes 69% No 31%
Do you consider your PE program to be at a competitive disadvantage to your non-EU counterparts in terms of access to managers as a result of the AIFM Directive?
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No change Increased marketing activity Decreased marketing activity Not sure
0% 50% 100%
Observed Change in Marketing Activity among non-EU AIFMs Due to Lack of Marketing Passport
Somewhat positive 10% No impact 5% Somewhat negative 33% Very negative 19% Not sure 33%
Impact of Changes to Home Country National Private Placement Regimes Since the Enactment of the AIFMD
Source: 2014 ILPA Members Survey on AIFMD and Proposed Third Country Passport
JENNIFER CHOI, ILPA
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“ When we have examined how fees and expenses are handled by advisers to private equity funds, we have identified what we believe are violations of law or material weaknesses in controls over 50% of the time.”
–Andrew Bowden, Director of Office of Compliance, Investigations and Examinations, SEC, “Spreading Sunshine in Private Equity”, 6 May 2014
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Introductory Call Field Work Exam Close Out Deficiencies? Yes No Yes Comment Letter No “No Comment ” Letter Understand the firm; form theses. Enforcement Process Enforcement? Test theses. Develop conclusions.
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I don’t know 43% No 5% None (0%) Very Few (<10%) A Few (10-24%) Several (25-50%) Many (More than 50%) I don't know Yes 52%
Have any managers with which you invest gone through an SEC exam? In what portion of cases were there findings or recommendations issued by the SEC?
0% 10% 20% 30% 40% 50%
Methods of Discovering Managers Underwent SEC Exam
Other means (please explain) Our own review of public sources (e.g., ADV forms) The manager(s) notified us We inquired directly
Source: 2014 ILPA Members Survey on SEC Exams.
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Very Satisfied, 4% Generally Satisfied, 30% Generally Unsatisfied, 15% Very Unsatisfied, 7% Not requested/D
12% Not yet, plan to request, 32%
0% 20% 40% 60% 80% 100% Format and level
Frequency of disclosure Models provided post-commitment Clarity of LPA provisions on what is reported and how
Level of Satisfaction with Format and Detail of Reporting on Fees and Expenses
Satisfied Mostly Satisfied Mostly Unsatisfied Unsatisfied
Level satisfaction with information from managers about communications with regulators
Source: 2014 ILPA Members Survey on SEC Exams.
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0% 10% 20% 30% 40% 50% 60% 70%
Compliance protocols Allocation of transaction fees Fees related to operational resources Undisclosed fees, not covered by offsets Valuations used in marketing documents Allocation of co-investment opportunities Fees related to use of advisers Expense shifting over the life of fund
Frequency of Issues Identified in Findings Letters
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
Other Risk management Allocation of investment opportunities Indemnity and exculpation Valuations used in marketing documents Compliance protocols Reporting Conflicts of interest Partnership expenses Management fees - offsets and carveouts
Impact of Exam Findings on Diligence or Preferred LPA Provisions
Source: 2014 ILPA Members Survey on SEC Exams.
Which of the following issues related to alignment and
transparency are of the greatest concern to you?
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0% 20% 40% 60% 80%
Fees related to use of affiliates Allocation of transaction fees Allocation of co-investment opportunities Valuations used in marketing documents Expense shifting over the life of the fund Undisclosed fees, not covered by offsets
Source: November 2014 ILPA SEC Exams Webcast Audience Poll.
Purpose: to provide resources to encourage wider adoption of more
uniform practices that will improve quality of reporting and disclosure
Goal: develop provisional guidance for industry feedback by Fall 2015 Working group includes senior Audit/Reporting and Investment
professionals from Member LPs, Administrators and LP Advisors; will grow over time to include GPs, software platforms, auditors
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OUTPUTS
Issue:
GP practices that may affect investors are not always straight forward or well understood.
may help with due diligence: Comment letters; schedules of fees and expense reimbursement; G/Ls etc.
guide for questioning. Focus and past AND future.
Approach:
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Develop theses around incentives and test your theses through direct questions.
“I see that the GP invests through a side-by-side vehicle rather than through the fund. Does that vehicle absorb broken deal expenses/any expenses?” “I see that you invest alone in large profitable companies. What expenses do these companies reimburse? What fees do they pay? What contracts have they signed with you?” “I see that you have many large LPs who have co-invested
In the future?”
Approach:
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letters
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Issue:
Protect LP interests without interfering with GP deal making.
Approach:
0% 20% 40% 60% 80% Nature/Character of Responses for Requests for Information Format and Level of Detail Provided in Reported Fees/Expenses Internal Culture and Processes around Compliance Protocols Wording of Indemnification Provision in LPA Stated Policy or Proces around Allocation of Coinvestment Opportunities
Most Telling Indicator of Quality
provisions in documents
to information requests
individuals
data
reconcile
reports
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Warning Signs
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Are there any portfolio company level fees which are not used to reduce the LP’s management fee burden?
What will I receive, when, and with what frequency? Will fees be disclosed with sufficient information with which to reconcile fees in the call notices, financial and other reports? Can we see a complete modeling of fees over the life of the partnership (plus extensions) given various return scenarios?
What is the total amount of directors’, consulting and other fees paid by the portfolio company either to the GP/fund
How are changes in team, legal counsel, administrators, auditors, regulatory actions disclosed to LPs through reports, LPAC materials, etc.?
Does the amount under “Professional Expenses” charged to the fund include monies paid to any firms or individuals whose work is provided under the same holding company umbrella as the GP, i.e., a subsidiary of the sponsor?
Can we see your Form ADV/Form PF?
What happens to Co-investment fees? Do they offset to the fund for underwriting risk? How and when would you charge litigation and legal expenses in relation to a claim?