[ C O V E R
“Banks are pulling
back from lending,
and private equity
have identified
a potential
opportunity.”
DAVID BAILEY,
CO-FOUNDER, AUGENTIUS
markets. In fact, 64% of managers
told an Ernst & Young (EY) survey
that regulation was now the biggest
source of complexity in their organi-
sations.
“AIFMD introduced more additional
cost to the industry – such as deposi-
tary requirements – and some would
question whether this has actually
enhanced investor protections or
not,” says David Bailey, co-founder at
Augentius, a private equity and real
estate administrator. “The lack of
standardisation in AIFMD practices
across the EU is a problem. When I
compare the AIFMD interpretations
in Germany with Denmark or the UK,
for example, then there are consider-
able variations in what is effectively
the same legislation.”
Looking ahead, Brexit is likely
to deliver additional complexities,
according to Bailey. Anticipating the
consequences of Brexit on private
equity is like trying to guess where
the dice will land on a roulette table.
In extremis, a parallel UK regulatory
regime could be introduced poten-
tially doubling up on the amount of
reporting managers with European/
UK investors have to comply with.
S T O R Y
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A D M I N I S T R AT I O N ]
These rules and changes are not
devastating when confronted on their
own, but bunched together they do
devour resources. Back offices are
overworked and overextended, and
this is exacerbated by the different
deadlines and reporting methodolo-
gies expected by the framers of these
regulations. Most experts would
argue that reporting is an interference
and managers would prefer their
staff to be committed to more critical
aspects of the business.
Regulation is therefore leading to
more outsourced relationships. “We
can provide value to managers and
develop solutions for their needs,
such as regulatory and investor
reporting. We are seeing a move from
what has historically been a self-ad-
ministered industry to one which is
increasingly partnering or entering
into strategic dialogues with third
party providers,” says Patellaro.
Investors: Money talks
Institutional investors – facing poor
value for money in fixed income and
certain alternative asset classes – see
private equity increasingly as a return
salvation, and this has been a growing
trend over the last few years.
“Public pension funds continue to
account for the largest proportion of
capital invested in private equity by
The Private Equity Issue 2017
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