As the moribund private equity market begins to show signs of life, investors and consultants polled by SEI say they are dissatisfied with the information they’re receiving from managers.
SEI, in collaboration with Greenwich Associates, surveyed 411 institutional investors, consultants and fund managers. Of the investors polled, 43% said they received all the information they wanted from their p.e. managers. Among consultants, that percentage was a mere 10%. On the other hand, 85% of fund managers believe their investors are receiving all the information they need.
The report, Searching for Alignment, part two of SEI’s three-part 2011 Private Equity Survey, revealed that managers sense investors’ concerns—45% named meeting investor expectations as their firm’s greatest operational challenge. That said, there seems to be some disconnect between investors and managers when it comes to just what information is key: 75% of managers think it’s industry and sector reporting data while 75% of investors and consultants want more information in areas like leverage use and volatility.
Both investors and managers agree that finding quality investment opportunities is the most pressing challenge facing the industry today. (Fully 50% of consultants, on the other hand, think economic uncertainty is the predominant challenge). Moreover, according to a recent survey by RSM McGladrey cited in the report, 60% of p.e. executives in 2011 are focusing on acquiring new businesses—a contrast to 2010 when most were looking to add on to existing portfolio companies.
The backdrop against which the survey is set is an encouraging one: according to the placement agent Triago, the net asset value of all private equity funds worldwide rose 40.1% over the seven quarters through the end of 2010, bringing valuations close to their 2007 peaks. As a result of improved market conditions, only 17% of investors and 8% of managers surveyed expressed concern over poor conditions for exits in the next 12-18 months.
The SEI report warns that managers tempted to view recent signs of recovery in the private equity markets as a “cyclical return to normality and prosperity” may be in for a shock as the “concerns and expectations of investors were profoundly influenced by their experience during the financial crisis.”
In what he terms the “era of the investor,” SEI’s Philip Masterson says managers who “continually strive to fulfill investor expectations will lead the pack when it comes to raising and retaining assets. 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.”
SEI provides investment processing, fund processing and investment management business outsourcing solutions that help corporations, financial institutions, financial advisors, and ultra-high-net-worth families create and manage wealth. The firm and its subsidiaries and partners manage or administered $430 billion as of June 30, 2011.