Updated with correction
More pension funds aren't just talking the talk on private equity fee transparency — they're asking general partners to use a new, standardized disclosure template introduced earlier this year.
Since the template's creation in January, 42 limited partners have endorsed the form, which details fees, expenses and carried interest, up from 21 at its introduction. About half of those limited partners require its use in some way, said Jennifer Choi, Washington-based managing director of industry affairs at the Institutional Limited Partners Association, which created the form.
Such standardization helps board members as well as participants make comparisons between general partners, as opposed to wading through an undecipherable data dump, sources said.
“The key point here is getting people to coalesce around a single approach, a single standard,” said Ms. Choi. “Most (general partners) supply these figures, but (each) in a different fashion. ... It could be in financial reports, in footnotes, in capital calls.
“It's one thing to require GPs to provide information,” Ms. Choi noted, “but it has to be disclosed in a way that makes it understandable and easy to compare with data from other GPs. ... If you're comparing total net and total cost, you need to make sure you know how they make the sausage. That's the big challenge here in the private equity world.”
Clint Zweifel, Missouri state treasurer and a board member for the $7.7 billion Missouri State Employees' Retirement System, Jefferson City, said private equity fee disclosure should be the same as other financial reporting in terms of what's required and how it's displayed.
“It would be nice to have a standardized way to measure, just like everyone else in the financial world,” said Mr. Zweifel, who has endorsed the form. “ILPA is step one. Step two is, if collecting this information as a public entity, to follow through with how fees are disclosed, take that information, and disclose it in a way that makes sense to taxpayers and beneficiaries. There's a movement that's grown here. Every sector is being more transparent. ... We know private equity plays an important role and pension funds value that role, but collecting all information on it is of primary importance to our participants.”
MOSERS and the $28.2 billion South Carolina Retirement Systems, Columbia, were cited in a report from Pew Charitable Trusts as two of the pension funds to first seek both performance and invoiced management fees from their private equity managers. That report, released Feb. 18, stated that disclosure policies among 73 public pension funds with a combined $2.9 trillion in assets varied widely and made it “difficult for policymakers, stakeholders and the public to gauge the actual performance of these funds.”