Investing in Private Equity Partnerships: The Role of Monitoring and ReportingThe private equity industry has experienced rapid growth on a global scale in recent years. Institutional investors nowadays see private equity as a core element of their portfolios and have increased their allocation to this asset class accordingly. With the private equity industry becoming more mature and institutional investors - coming more experienced with the asset class, the debate on the industry’s transp- ency has intensified. In order to manage their exposure to private equity effectively, institutional investors demand increased levels of transparency and disclosure from private equity fund managers. Are these calls justified? What information do private equity fund investors actually need? Are private equity fund managers providing suf- cient reporting? Kay Müller’s distinguished dissertation sheds light on these questions. For the first time, he provides empirical analysis combining the perspective of private equity fund investors and managers. On the basis of a comprehensive set of interviews with le- ing European private equity fund investors, he presents an in-depth insight into the monitoring activities of institutional investors and explores their information requi- ments. These results are then contrasted with the actual reporting by fund managers based on a disclosure study of a unique sample of private equity fund reports. The analysis reveals several important information gaps and provides guidance on areas for improvements. The focus of this book is the relationship between investors and fund managers, which is at the heart of the private equity industry. |
Contents
| 1 | |
Figure | 9 |
INVESTING IN PRIVATE EQUITY PARTNERSHIPS | 11 |
Figure | 15 |
Figure | 21 |
Purposes of funds advisory boards 102 | 28 |
partnerships | 31 |
Figure | 34 |
Importance of longterm cash flow planning | 122 |
Fund investors information sources | 128 |
Problems with a fair valuebased approach of portfolio company | 137 |
Potential reasons for the reluctance of fund managers to disclose | 144 |
FUND MANAGERS REPORTING | 145 |
Illustrative example Classifying preferred shares as debt or equity | 153 |
Effect of classification of investments on income | 160 |
Accounting for portfolio companies according to IFRS | 166 |
Figure | 40 |
Figure | 46 |
Figure | 52 |
Figure | 56 |
FUND INVESTORS MONITORING | 63 |
Figure | 69 |
portfolio | 115 |
Checklist to identify a private equity fund | 176 |
Guidelines | 254 |
CONCLUSION | 263 |
LIST OF INTERVIEW PARTNERS | 277 |
| 291 | |
Common terms and phrases
able according accounting activities actual additional analysis applied approach appropriate assess buyout cash flow changes chapter commitments comparable concerning consolidated costs decision depends determine disclosure discussed distributions entity equity investments European example existing exit fair value fees Figure fund investors fund level fund managers fund reports fund’s Furthermore future IFRS important increase individual industry interest internal interviewed issue limited partners liquidity loss measurement ments method Meyer/Mathonet 2005 monitoring multiple partnership performance period portfolio company portfolio company investments positive possible potential preferred present private equity fund profit question reasons relationship relevant reporting requirements respect risk role score secondary selection share significant sources specific standard statements strategy structure techniques tion transactions typically usually valuation venture capital
Popular passages
Page 307 - Low, PY (2000): Impact of culture, market forces, and legal system on financial disclosures, in: International Journal of Accounting, 35 (4), pp.