SEC Eyes Private-Equity Performance Claims

Oct 29 2014 | 1:03pm ET

The Securities and Exchange Commission is casting a skeptical eye over performance claims made by private-equity firms.

The regulator is looking into how firms report their internal rates of return for past funds in marketing materials, Reuters reports. The metric does account for fees paid by investors—but may also include the returns enjoyed by the firm and its general partners, who pay no fees.

That inclusion would inflate the returns. The SEC is investigating whether firms are disclosing enough about how they calculate their IRRs.

Unlike hedge funds, private-equity fees are not standard. Nor, it seems, are practices for calculating IRR: Bain Capital, Blackstone Group and Carlyle Group exclude returns earned by partners, but Apollo Global Management does not. All four firms disclose their method to investors, according to Reuters.


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