People who make a living at communicating in private equity are living through some very interesting times, as you'll read in this issue of
The most straightforward way to sum up a set of complex rules and regulations surrounding private equity communications is this – you can get in quite a lot of trouble for saying things a certain way, and you can get in an equal amount of trouble for keeping your mouth shut. Such is the new regulatory order that private equity finds itself in.
As we speak, lawmakers on both sides of the Atlantic are forming a new set of disclosure rules to apply to alternative investment funds. There is a widespread belief that private equity firms need to do a better job at revealing who their investors are, what they have invested in, what fees they are paying, what fees they are charging, how much money they are making, how their performance has been and what risks they are taking. As you'll read on p. 6, a variation on this trend took form in the tussle between Blackstone and the SEC, with the latter asking the former to report more details on the performance of Blackstone's underlying funds. Blackstone declined, saying the information was not relevant to the stock investors.
The Blackstone performance dispute raises a glaring contradiction in the regulatory environment today, that being a demand for disclosure but rules against general solicitation. I spoke recently with a US middle-market GP who said his firm, in building a new website, wanted to proudly display the IRR of its funds. The firm's lawyers said no. The GP told me he pushed back somewhat and then received a curt phone call from an irate legal counsel who said: “I don't know how else to tell you – you can't do that.”
Private equity floats precariously in an unregistered safe harbour where communicating with the great unaccredited masses is frowned upon. Now that GPs will be told to open up about their operations, they will have to juggle two sets rules until the regulators find a way to address the pain points.
Outside of the variegated regulatory regimes around the world, private equity still faces communications challenges that amount to plain old bad PR. This problem needs to be met by throwing out the old playbook that too many GPs have used, with the central strategy being to not communicate at all.
Enjoy the issue,