Investors demand greater transparency from GPs - survey

The survey, which polled more than 400 institutional investors, consultants, and fund managers, found that the traditional "three Ps" - people, investment philosophy and investment performance - remain the most important factors in manager selection. However, a fourth P - process - is becoming increasingly important. This is reflected in the more significant role played by portfolio transparency, fees, and quality of reporting and communications.

"Managers have reason to be encouraged by investors' renewed enthusiasm for private equity; however, in exchange, more is expected of them," said Ross Ellis, vice president and head of the SEI Knowledge Partnership. "Managers are facing greater performance pressure, greater fee pressure, and greater transparency expectations. They have to increase their operational effectiveness if they hope to meet the greater demand for value and compete in the 'era of the investor.'"

The survey also found that 26% of respondents plan to increase their private equity allocations over the next 12 months. More than two thirds of investors identified returns as their primary objective while 50% of consultants highlighted diversification as the key driving factor.

Investor expectations for private equity have been bolstered by a recent surge of successful exits. Globally, more than 300 exits worth an aggregate value of $120.1 billion were logged in the second quarter of 2011, far outpacing the previous record of $81.5 billion in the second quarter of 2010.

There is also an increasing appetite for a greater variety of private equity asset types. More than 80% of survey respondents said they invested in venture capital, leveraged buyouts, growth capital, distressed investments, and mezzanine capital. Sentiment is also bullish in the secondary market.

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