SENNA

Rising LP Scrutiny Puts Pressure on Private Equity CFOs

Private equity firms are facing heightened scrutiny from their limited partners (LPs) over fund reporting and transparency, putting increased pressure on chief financial officers to provide more detailed information.

According to a report from industry publication Private Funds CFO, the trend reflects LPs' growing demand for granular data on portfolio company performance, fees, and expenses. This comes as investors seek greater visibility into how their capital is being deployed and managed.

"LPs are asking for more and more information - it's a constant barrage of requests," said the CFO of a leading private equity firm, who spoke on condition of anonymity. "Satisfying all of these demands requires significant time and resources on our end."

The report noted that large institutional investors like pension funds and sovereign wealth funds are leading the charge, pushing fund managers to enhance their reporting practices. In some cases, LPs are even requiring CFOs to provide real-time data updates, rather than the traditional quarterly or annual reporting cycle.

"LPs want to understand the granular details of our portfolio, not just the high-level performance numbers," said the CFO. "They want to see the underlying drivers of value creation and be able to analyze trends across our investments."

This heightened scrutiny comes at a time when private equity firms are managing record levels of dry powder, with over $1.5 trillion in uncalled capital globally, according to industry data. As competition for deals intensifies, LPs are seeking more assurance that their capital is being put to work effectively.

"Investors are hyper-focused on fees and expenses, making sure they understand exactly where their money is going," said Kelly DePonte, a managing director at placement agent Probitas Partners. "CFOs have to be extremely diligent in documenting and justifying every dollar."

The trend is also driven by increased regulatory oversight, with authorities like the U.S. Securities and Exchange Commission placing greater emphasis on fee transparency and conflicts of interest in the private funds space.

To keep pace, private equity CFOs are investing heavily in data management systems and reporting infrastructure. Many are also hiring dedicated investor relations professionals to handle the growing volume of LP requests.

"It's a balancing act - you want to be responsive to your investors, but you also can't get bogged down in endless information demands," the anonymous CFO said. "Finding the right level of detail and frequency is critical."