January 5, 2017 — Jessica Davies, WSJ

Searchlight Latest Firm to Embrace ILPA Reporting Template

Searchlight Capital Partners, which counts British Wellington bootmaker Hunter Boot Ltd. and cloud hosting business Rackspace Hosting Inc. among its investments, has joined the growing list of private equity firms to endorse an industry fee reporting template launched last year to combat hidden fees and charges.

Others that have adopted the template since its formation include Carlyle Group, TPG, KKR, Apollo Global Management, Advent International, Blackstone Group, Silver Lake, CCMP, Hellman & Friedman and fund-of-funds manager Pathway Capital Management.

Thousands of investors and fund executives around the world are now using the template formed in early 2016 by the Institutional Limited Partners Association, ILPA Chief Executive Peter Freire recently told Private Equity News.

ILPA created the template, a comprehensive disclosure model that requires private equity firms to outline the fees they charge across a number of different areas, to better standardize private equity reporting.

Carlyle, TPG and Pathway were among the first private equity firms to endorse the template when it was launched, but now the number of firms that have adopted the template has reached around a dozen. As of November, 56 institutional investors had endorsed the template.

Erol Uzumeri, founding partner of Searchlight, told Private Equity News that the firm has used the template in its quarterly reporting since the second quarter of 2016.

“We are pleased to adopt the ILPA fee reporting template and started including this in our quarterly reporting to investors as of Q2 2016,” he said. “We feel that transparency is an important part of the relationship between GPs and LPs, and we are committed to providing our investors comprehensive information that facilitates their monitoring activities.”

Although the number of private equity firms that have adopted the template is still dwarfed by the number of institutional investors that have endorsed it, more investors are putting pressure on firms to use it.

Private Equity News reported in October that U.S. pension plan the California Public Employees’ Retirement System, otherwise known as Calpers, would walk away from funds that failed to adopt the template.

The move has been strengthened by new legislation in California that requires funds to disclose the fees they charge to public pension plan investors in thorough detail. The law, which California Governor Jerry Brown signed in September, forces fund managers to provide their pension fund investors with details of the share of carried interest that pension investors pay to the fund manager, and to disclose the pension investor’s share of the total fees and expenses paid by all portfolio companies that the fund backs, on top of outlining the total fees that investors pay.

Although many private equity firms have their own version of ILPA’s template, the standard is meant to create a uniform process for disclosure that streamlines paperwork and ensures transparency.

“The reality is size and complexity is so that there’s a demand for [a] higher level of transparency than there was in the past,” Mr. Freire said in October, adding that one of the primary concerns among LPs is a lack of sufficient disclosure of fees and expenses.