Are private equity managers being asked to play poker with their cards facing up?

Dec 13th, 2009 | Filed under: Private Equity, Today's Post | By:
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cards facing upApparently it’s not just hedge funds that are now being held to a much higher standard when it comes to demands for transparency by institutional investors.

According to a recent survey published by SEI (downloadable with free registration here), financial advisors and other investors, private equity (PE) shops are also under increasing pressure to provide higher quality reporting and more “look-through” ability to their existing and potential investors. More…

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  1. Since private equity is basically Stock Beta + Illiquidity Premium, aren’t they just cutting their own throats by demanding a reduction of liquidity risk from their PE investments?

  2. I think you’re right, though I also think it depends on the type of investment and level of risk. For more traditional types of PE, real estate, infrastructure, etc., sure; for more “nuanced” PE deals (capitalization, securitization, etc.) perhaps not, depending on the level of risk versus the level of transparency.

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