OAKS, PA--(Marketwire -11/08/11)- In the wake of several years of underwhelming performance and lack of liquidity, many private equity fund managers are increasing transparency and decreasing fees to attract and retain skeptical investors, according to a global survey report released today by SEI (NASDAQ: SEIC - News) in collaboration with Greenwich Associates. In fact, the majority of managers polled (59 percent) said they have increased transparency to retain/attract new capital since the 2008 market decline, while more than a third of managers (37 percent) said they have lowered management fees. The survey report, titled "Client Knowledge to Competitive Advantage," points to both an increasingly wary investor base and an increasingly competitive landscape for capital as the private equity market begins to show signs of life.
"While there is some optimism in the private equity space, the survey shows that investors are demanding more transparency and many managers are still playing catch up," said Ross Ellis, Vice President and Head of the SEI Knowledge Partnership for SEI's Investment Manager Services division. "Managers are investing in reporting and client service but in some cases it is not enough for a skeptical investor base. The expectations are much different in the wake of the financial crisis and meeting those ever changing needs will be the difference between winning and losing in the Era of the Investor™."
The survey, of more than 400 institutional investors, consultants, and fund managers, revealed that outside of performance, 22 percent of managers said their greatest challenge was getting investors comfortable with infrastructure. Additionally, providing satisfactory performance attribution data was identified as the greatest challenge by 18 percent of managers polled. To that end, the majority of managers polled (51 percent) said they have made investments in client reporting in the past 18 months or plan on doing so in the next 18 months. A similar number of managers polled (49 percent) said they have made investments in client service in the past 18 months or plan on doing so in the next 18 months. "Institutional standards are clearly coming to the private equity space," said Rodger Smith, Managing Director of Greenwich Associates. "These standards require a higher level of client reporting and emphasize the importance of transparency, performance attribution, and fair fees."
The survey also reveals a disconnect between what managers see as the biggest obstacle to raising capital and what investors view as the biggest obstacles to allocating more to private equity. Half of managers polled see investor fear and reluctance as their biggest obstacle, followed by performance (22 percent), and liquidity concerns (13 percent). Investors, meanwhile, pointed to liquidity terms and risk concerns as their biggest obstacles, followed by poor performance and high fees/cost. Fear and reluctance was viewed as one of the three biggest obstacles by a mere seven percent of investors polled.
In terms of what steps they are taking to attract larger institutional mandates, managers are more in line with what investors said they find appealing. The majority of managers polled (61 percent) said they have increased reporting transparency, 48 percent said they have offered graduated fees based on the size of the mandate, and 13 percent have offered reduced lock-up periods. Similarly, graduated fees were pointed to as most appealing by 39 percent of investors, followed closely by increased transparency (33 percent), and reduced lock-up periods (28 percent).
The survey report is the final in a three-part private equity series published by the SEI Knowledge Partnership, which provides ongoing business intelligence to SEI's investment manager clients. To request a copy of the report, please visit http://www.seic.com/PEAdvantage.
About SEI's Investment Manager Services Division
SEI's Investment Manager Services division provides comprehensive operational outsourcing solutions to support investment managers globally across a range of registered and unregistered fund structures, diverse investment strategies and jurisdictions. With expertise covering traditional and alternative investment vehicles, the division applies customized operating services, industry-leading technologies, and practical business and regulatory insights to each client's business objectives. SEI's resources enable clients to meet the demands of the marketplace and sharpen business strategies by focusing on their core competencies. The division has been recently recognized by the Money Management Institute as "Service Provider of the Year," by Buy-Side Technology as "Best Fund Administrator" and by HFMWeek as "Best Single Manager Hedge Fund Administrator (Over $30B AUA-US)," and "Best Funds of Hedge Funds Administrator (Over $30B AUA-Europe)."
For more information, visit http://www.seic.com/IMS.
SEI (NASDAQ: SEIC - News) is a leading global provider of investment processing, fund processing, and investment management business outsourcing solutions that help corporations, financial institutions, financial advisors, and ultra-high-net-worth families create and manage wealth. As of September 30, 2011, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $395 billion in mutual fund and pooled assets or separately managed assets, including $162 billion in assets under management and $233 billion in client assets under administration. For more information, visit www.seic.com.
About Greenwich Associates
Greenwich Associates provides research-based strategy management services for financial professionals. Greenwich Associates' studies provide benefits to the buyers and sellers of financial services in the form of benchmark information on best practices and market intelligence on overall trends. Based in Stamford, Connecticut, with additional offices in London, Toronto, Tokyo, and Singapore, the firm offers over 100 research-based consulting programs to more than 250 global financial services companies. For more information on Greenwich Associates, please visit www.greenwich.com.