A 360 degree view on Private Equity Fee Transparency

As a consultant regularly interacting with GPs, LPs and Fund Administrators, I find myself cautiously facing the topic of fee transparency head on; particularly in light of the new ILPA best practices.

 ILPA Best Practice on Fee Reporting

On one hand, as a former LP, this new template is fantastic!

The LP community has wanted and needed this for a long time. It makes me happy, since I was part of the team that developed the first ever ILPA templates back in 2004. In fact, in the years that followed, you could find me on many panels at private equity conferences, crusading for transparency; something I still believe strongly in today.

But on the other hand, as a former employee of a small GP with a lean in-house back office and also as a former operations executive in an outsourced fund administration shop, this new report takes significant effort to prepare; particularly the Level 2 content. Adoption may not be easy for GPs who are not using robust FinTech platforms or top tier fund administrators.

Today, in helping my GP and LP clients build and improve their investment operations, I see extra costs being passed back to the LPs in the form of increased fund administration fees, directly attributed to fee transparency.

The irony of paying fees to find out what fees you paid is not lost on me.

I hope, as this template makes its way into common usage, the dialogue it generates may lead to a simplification in practice that still achieves essentially the same result, without increased fees. Until then, kudos to the ILPA for leading this charge.