ILPA Clears Up Comparison to IPEV Guidelines: Right, Wrong, Different, Alike

 

Whether or not you view the ILPA Principles as acceptable “Best Practices” standards, both GPs and LPs alike now have a set of guidelines established by the International Private Equity and Venture Capital Valuation Board to contrast and compare against the ILPA Principles.  Apparently, ILPA had received so many inquiries about the IPEV Guidelines release that ILPA issued a breakdown of the similarities and differences.

Check out the actual release here: http://bit.ly/JwwM5l

 

Items ILPA Principles IPEV
Reporting
  • Released set of reporting templates / formats
  • Creating standard for possible electronic data sharing
  • No reporting templates / format
  • Encourages structure and format to be agreed upon by GP / LP
GAAP Focus
  • Does not promote as standard
  • Does not promote as standard
Valuation
  • Measured as Fair Value; no preference for methodology
  • Supports IPEV Valuation Guidelines
  • Measured as Fair Value
  • Established formal Valuation Guidelines
GP Compliance
  • No formal GP compliance
  • Provides guidance for GPs to indicate compliance
Historic Data
  • Set focus on entire length of data scope (i.e., since inception, period vs. period)
  • Sets focus on current status of accounting data
Summary
  • Details firm and fund level information
  • Detail fund level data
Portfolio Company Reporting
  • Explicitly lays out required details of interest to GPs
  • Structure of data is positioned in single report area
  • Does not include the following as required details: IRR, Realized Proceeds, Multiples
  • PC details are in different areas of what is deemed “Essential” vs. “Additional” disclosures
  • Minimal key metrics for current and realized PCs in various sections
  • Pushes to include: IRR, Realized Proceeds,Multiples
  • Total Invested for current investments is not included

 

From my experience, two organizations trying to create strategic industry focus is great for the industry. Each and every GP and LP can review the different vantage points and choose how they follow any or all of the guidelines.  I’ve seen, literally, tens of thousands of GP financial reports dating back to the 1980s and there is a tremendously wide spectrum of what has/is being reported as well as the structure and format.

Industry players on both sides now have a better idea of the ultimate goals these guidelines, principles, and/or best practices have been set out to improve. (Read last month’s blog on what regulation is coming to PE)

These Billion Dollar fund managers and investors are preparing themselves (either consciously or subconsciously) for sharing their data electronically.  It’s a matter of time, organization, and momentum; we are seeing (you are reading) the inevitable so stay in front of the curve.

 

Posted by:  Justin Marchi