In this section you will learn more about:

• Objectives and Rationale of Reporting
• Issues to Consider
• Documents

Objective and Rationale of Reporting

• Fund Manager reports to Investors for the following reasons:
  • reporting is normally a legal requirement
  • reporting is considered best practice
  • timely, accurate, full disclosure is a healthy approach to building good Investor relations and to managing Investor expectations about Fund performance
  • reporting serves as a key mechanism for Investor supervision and monitoring of the Fund
• Reporting by Fund Manager to Investors may not be a regulatory requirement in some countries. For instance, it’s not a requirement in the United States, because Private Equity Funds are an unregulated asset class.

Back to Top

Issues to Consider

• Frequency: For Private Equity Funds, the frequency of reporting should be quarterly. The reporting should be approved by the external auditors once per year.
• Content: What do Investors really want to know? The design of the reporting format should keep the following questions in mind:
  • Valuation questions:
    1. What are the Fund’s assets?
    2. How should the Investor value its outstanding exposure?
    3. What is the effect of any depreciation on the Fund’s value?
    4. What are the factors contributing to the gap between gross and net IRR?
    5. What are the uses of the funded capital? What are the sources of the distributed capital?
    6. Are poor investments being written down on a timely and conservative manner?
    7. What is the Fund’s divestment schedule, and is the Fund divesting in a timely manner?
  • Compliance questions:
    8. Advance notice, where possible, of capital calls and distributions
    9. Are the Fund Manager and the Fund in compliance with the Fund’s legal agreements and with industry best practices?
    10. Is the Fund Manager making full use of Investor representation on governance committees? Are the Investors being kept in the loop concerning important conflicts, valuations, and audit matters?
    11. Is the Fund’s reporting punctual, accurate, and credible?
  • Value addition questions:
    12. Have any significant changes occurred to the composition of the Fund Manager team? Is the Fund Manager team paying full attention to the Fund, or is it distracted by other Funds or other business activities?
    13. Are Investees progressing as a result of Fund Manager investment? Is the Fund Manager adding value to the Investees, or merely acting as a passive investor?
    14. What is the quality of the Fund Manager’s relationships with the Fund’s Investee management?
• There is no one standard reporting template in existence within the industry, in terms of design, presentation, or content. A number of efforts have been made to reach consensus amongst the Investor and Fund Manager communities on (i) the substance of the material to be reported; and (ii) its presentation. In some cases, the effort has been led by an industry association, such as the British Venture Capital Association (BVCA), the European Venture Capital Association (EVCA), and the Institutional Limited Partners Association (ILPA).
• IFC has selected the 2001 EVCA Reporting Guidelines as the starting point for its reporting template development. IFC has worked with other leading members of the International Financial Institutions (IFI) community to augment the EVCA guidelines.  The augmented areas focus on:
  • Additional Investee details, including valuation information
  • Providing the Investor with composite or aggregate information in addition to individual entity information
  • Greater transparency concerning gross and net IRRs
  • Individual Investor capital account
  • Sources and uses of funded capital
  • Compliance
  • Any changes to Fund Manager processes and procedures, especially decision making
  • Deal flow analysis
  • Multiple currency issues
  • Disclose Fund’s complete list of Investors
  • All significant governance events
  • General market trends
• The legal form (e.g. Partnership, Trust, LLC) of the Fund in question will impact upon the nomenclature used in the reporting.

Back to Top

Documents

Download our Suggested Fund Manager Reporting Template.

Back to Top