Coalition of Pension Funds Launch Fee Transparency Initiative

A group consisting of over 300 institutional investors – including many of the U.S.’ largest public pension funds – on Thursday announced the launch of a project called the Fee Transparency Initiative.

The Fee Transparency Initiative, created by the Institutional Limited Partners Association (ILPA), aims to implement “best practices” for the reporting and transparency of fees — including carried interest — paid to outside money managers. Additionally, it will attempt to create a framework to improve the alignment of interests between pension funds and managers.

The Initiative will build on the Private Equity Guidelines already maintained by the group.

From a press release:

The Institutional Limited Partners Association (ILPA) is leading efforts to encourage broader adoption of more uniform reporting practices in the private equity industry. ILPA has launched the Fee Transparency Initiative, a broad-based effort that aims to establish more robust and consistent standards for fee and expense reporting and compliance disclosures among investors, fund managers and their advisers.

The Fee Transparency Initiative, comprised of senior investment and reporting professionals from a cross-section of investor institutions and advisers, will produce industry guidance as it relates to reporting and transparency over both the near and long term.

[…]

The first deliverable of the Initiative will be a reporting template that details, at the level of an individual Limited Partner investor, all monies paid to the fund manager (General Partner or “GP”) and its affiliates, including fees, expenses and incentive compensation, i.e., GP profit share (also known as carried interest). Under the updated guidelines, individual LPs would be provided detailed, periodic balances for their share of paid and accrued fees and GP incentive compensation. LPs would also receive a clearer picture of manager compensation received from other sources, such as portfolio companies and affiliated entities.

The group includes CalPERS, the Florida SBA, the New York Teachers Retirement System, the State Teachers Retirement System of Ohio, the Teacher Retirement System of Texas, the Washington State Investment Board, and many more funds.

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