24 Nov 2015
Private equity industry affirms commitment to greater transparency and accountability with updated Professional Standards Handbook and Investor Reporting Guidelines
Created by institutional investors, private equity firms and industry advisor
members of Invest Europe
Invest Europe, formerly the European Private Equity and Venture Capital Association, has today published its 2015 Professional Standards Handbook, a comprehensive and up-to-date set of standards and guidelines for the private equity industry.
The Handbook reflects the heightened standards of transparency and accountability being pursued by investors in Europe’s growing private equity industry, which represents €545 billion of assets under management. It also takes into account the new regulations in Europe, including the Alternative Investment Fund Managers Directive (AIFMD), which came into force since the last detailed update of the Handbook in 2013.
“Invest Europe has been at the forefront of setting best practice and industry standards since our organisation was established over 30 years ago and we’ve published professional standards guidance for the last two decades,” said Dörte Höppner, Chief Executive of Invest Europe. “We are proud to continue this important work alongside our investor and fund manager members, who have jointly developed these comprehensive and up-to-date guidelines to ensure the industry operates according to the highest professional and ethical standards.”
As part of the Handbook revision, Invest Europe has published substantially updated guidelines for reporting by private equity firms to their investors, which emphasise the importance of clear and detailed disclosure of fees. As well as increasing transparency, the guidelines encourage additional reporting to address areas of non-financial disclosure – including environmental, social and corporate governance (ESG) – and enhanced clarity on reporting metrics. The guidelines also reflect advances in accounting standards since the last update.
“Institutional investors demand high standards on issues such asresponsible investment and fee transparency,” said Marta Jankovic, Invest Europe’s Professional Standards Committee Vice-Chairman, and Senior Sustainability and Governance Specialist at APG Asset Management. “Invest Europe’s updated Professional Standards Handbook integrates environmental, social and corporate governance topics throughout and the emphasis on regular and transparent disclosure to investors, including fee calculations, sets a clear benchmark for all fund managers.”
The updated Handbook was created by Invest Europe members, which include private equity firms and their institutional investors, as well as industry advisors, working in collaboration for over a year. Beginning and ending with member consultations reviewed by Invest Europe’s Professional Standards Committee, its guidance demonstrates consensus across the industry about best practice in today’s market.
“Private equity backs over 25,000 businesses employing up to 8 million people in Europe,” said Bill Watson, Invest Europe’s Professional Standards Committee Chairman and Managing Partner at Value4Capital. “With this scale and the increasing economic importance of the private equity industry, ensuring all firms understand and operate to high standards of transparency, governance and manager accountability is a key role for Invest Europe. The 2015 Professional Standards Handbook provides fund managers with specific guidance relevant to their daily operations and decisions.”
All Invest Europe members are required to adhere to the Handbook’s Code of Conduct, a set of fundamental principles, which remain unaltered from prior editions. The Handbook also continues to endorse the International Private Equity and Venture Capital Valuation Guidelines as the basis of portfolio valuation in the industry.
“In the consultations and discussions for this year’s Professional Standards Handbook, representatives across the industry agreed on the need for an increased focus on the reporting of fees and better disclosure of fund management costs,” said KPMG’s Jonathan Martin, Chairman of Invest Europe’s Working Group on Accounting Standards, Valuation and Reporting and member of the Professional Standards Committee. “Recent industry regulations and debates also mean a greater focus on non-financial reporting, which is outlined in the Handbook investor reporting guidelines’ enhanced disclosure requirements.”
This year’s revision of the Professional Standards Handbook incorporates detailed input from Invest Europe’s Responsible Investment Roundtable, whose members incorporated enhanced coverage of environmental, social and corporate governance considerations relating to every stage of the investment cycle.
Over the last five years, Invest Europe members have invested in around 5,100 companies every year, of which around 80% are small or medium enterprises. Overall, since 2007, the European private equity and venture capital industry has provided €350 billion to invest in Europe’s growth. In 2014, the total amount of private equity investments in European companies increased by 14% to €41.5bn. Long term investors such as pension funds, insurers and funds of funds together provided over 40% of the capital raised.
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