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Private equity investors emphasis compliance when allocating capital, says Corgentum survey

The vast majority of private equity investors (83 per cent) feel that compliance management is one of the most important operational factors when evaluating private equity funds, according to a new survey by Corgentum Consulting, a provider of operational due diligence reviews and background investigations.

Similarly, 79 per cent of respondents feel that a weak compliance framework would negatively influence their private equity investment decision. However, only 14 per cent of investors feel private equity managers place more emphasis on regulatory audit preparedness as compared to hedge funds.

Some 86 per cent of those surveyed also believe that continued regulatory uncertainty in Europe presents significant challenges to private equity General Partners doing business on the continent. Specifically, Limited Partners are concerned with issues such as the General Data Protection Regulation (GDPR) enforcement and that Theresa May’s management of the UK Brexit process would require more compliance resources.

“These findings demonstrate that there is a significant opportunity for private equity General Partners to do a better job of communicating the ways in which they approach compliance management to their investors,” says Jason Scharfman, Managing Partner of Corgentum Consulting.

While 84 per cent feel that the growth of Limited Partner Advisory Committees (LPACs) bolster governance initiatives, 76 per cent say that managers could improve in this area with a focus on transparency, fees and conflicts. 

A total of 68 per cent of investors also feel that private equity managers need to better focus on the integration of technology and cybersecurity management with the compliance function, while 71 per cent of investors also believe that private equity managers should devote more resources to ongoing compliance management and regulatory testing and surveillance.

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