Buzz Archive:
More Private Equity Transparency in Europe -- a Precursor for the US?

by SJ Berwin, 5/22/2007

The scale of private equity in recent years has inevitably thrust it into the spotlight; but many large companies have been owned by concentrated groups of investors for a very long time. Indeed, until comparatively recently, that was the dominant model.

But many people do, of course, have indirect exposure to the sector - through their pension funds, for example. Pension fund beneficiaries cannot make asset allocation decisions, though; they have to entrust that to (carefully regulated) pension fund trustees and professional asset managers. Those people get about as much information about private equity funds as it is possible to get. Before they invest, they are able to analyse and re-cut track records any way they want, and during the fund's life they get detailed quarterly reports (usually based on robust international valuation guidelines) and pretty open access to the fund executives. There would be little benefit in ultimate investors getting that information, because there is nothing they could do with it. But, as it happens, they can get a lot of it anyway, because of US Freedom of Information rules.

Then there is the question of the private equity and alternative asset fund managers themselves. Are they a risk to the wider economy; to the stability of the financial system; to the integrity of the market? The UK's regulator, and the European Commission, both analysed those questions in some considerable detail recently, and in thoughtful reports both said that - on the whole - listen up US lobbying groups--private equity was already properly regulated.