December / January 2009 Issue

Foreign managers can set up partnerships in China, but it’s unclear whether the vehicles will be appropriate for private equity investments.

While British Venture Capital Association (BVCA) chairman Simon Walker trumpeted results showing high productivity, profit and asset growth for private equity-backed companies, he also warned about the effect of the UK's pre-Budget report on the country's competitiveness.

The US securities authority has charged Vinayak Gowrish and others of profiting from sharing inside information about the buyouts of TXU, Sabre Holdings and Alliance Data Systems.

Kansas securities regulators have accused Wichita, Kansas-based Lion Share Capital of collecting and keeping sham due diligence and good faith fees related to proposed private equity financings.

LPs have voted to slash the fund to €2.7bn following the departure of the firm’s chief executive in September.

A new French tax law, which provides welcome news for fund managers regarding social security contributions, is the latest step in the government’s effort to provide more clarity for its treatment of carried interest.

A UK environmental proposal that will impose new financial and time constraints on many managers has been changed after pressure from private equity firms, though the amendments are not as significant as the industry wanted.

New draft laws outlined by Australia’s Tax Office call for gains from asset sales by private equity firms to be taxed at higher rates, raising concerns about the impact on foreign investment.

The third major impact assessment to date shows that the EU directive for alternative managers could raise compliance costs by as much as €2.2 billion; previous studies estimated cost increases ranging from €1.9 billion to €3.2 billion.

The UK’s 18% tax rate on carried interest may end up looking relatively favourable, but it may not last long if the government decides to follow the example of the US, which is considering legislation that would double its own carried interest tax rates.

If carried interest is taxed as ordinary income in the US, American GPs will face much higher tax rates than some of their European peers.

The Oregon Investment Council has asked Wesley Edens, principal and co-chairman of Fortress Investment Group, to review the firm’s fee structures.

The Duff & Phelps managing director discusses yearend valuation issues, coming AICPA guidelines and human emotions in an exclusive interview with PEM.

The threshold for inclusion in the UK’s voluntary disclosure guidelines could be revamped to include smaller portfolio companies.

In addition to poor performance, poor alignment of interests and corporate governance will make new commitments a harder sell for LPs, according to a survey of LPs from Coller Capital.

In addition to increasing disclosure requirements for placement agents, the board of administration for the $112bn Florida state pension will make lawyers detail fees and contributions.

A proposed rule in California would turn placement agents into lobbyists. It’s yet another challenge to the definition of what a placement agent is.

The UK private equity firm says that Citi banker David Wormsley tricked it into buying EMI and alleges the investment bank has since tried to sabotage the music business’ position.

The pension giant's board has voted to sponsor legislation that would require placement agents to register as lobbyists, which would ban success fees, among other new rules.

If carried interest is taxed as ordinary income in the US, as is proposed by a new bill in Congress, GPs will have to make Medicare contributions of 2.9 percent out of their carry.

The bill now goes before the US Senate, and if approved will likely be signed into law by President Obama.

The Private Fund Investment Advisors Act, which would require all private equity and hedge fund managers with more than $150 million in assets to register with the SEC, must now face a test in the Senate.

A bill sent today to the US Senate would impose a 30% withholding tax on US income for foreign fund managers who fail to agree to new transparency requirements.

David Snow's predictions for the next decade

An expert analysis of the terms and conditions of OMERS’ planned C$20 billion LP-run infrastructure mega fund, which has no carried interest, no negotiation fees, no financing fees, no acquisition fees, and no fees on committed capital on the alliance.

Susan Saidens of SMS Valuation & Forensic Services discusses the correct valuation methodology for financial vs. nonfinancial liabilities, and how the new framework for fair value measurements applies to liabilities.

This decision tree might be of help in your next quarterly valuation process.

A number of regulatory issues that could make life difficult for GPs in the US and Europe are still unresolved.

Private Equity Manager recently spoke with Carroll Archibald, chief compliance officer, and Phil Jensen, chief financial officer, of San Francisco and New York-based investment firm Paul Capital about the future of regulation of both sides of the Atlantic.

The relationship between placement agents and their fund clients could get very messy depending on how current SEC proposals affect issues such as payment for previous work.

Blackstone, Centerbridge and Welsh Carson will not see commitments from New Jersey yanked following revelations that the firms unwittingly broke campaign donation rules.

Pledge funds are gaining steam among newer GP groups trying to make an impression with LPs. But the deal-by-deal funding model has some serious weaknesses that fund managers and LPs need to consider.

GPs are running out of excuses for slack personal-trading policies, including a desire to shield from colleagues details of personal wealth.

The founder and co-chairman of Fortress Investment Group believes heavier regulation of private equity is both inevitable and positive.

The deal will dramatically increase the Connecticut-based financial software and services provider’s private equity client base.

Marketing a shorter investment period is one way to sweeten the pot for cautious LPs.

A recent court decision shows that the offshore investments of UK private equity firms could be subject to the country’s higher tax rate, unless they can provide better documentation that strategic board decisions were made outside the UK.

A new survey of private equity professionals showed across-the-board decreases in compensation – mainly in the form of bonus cuts – for the first time in a decade, with private equity fund funds taking the biggest hit.

Dirk Leasure, who previously worked with financial sponsors for Goldman Sachs, will head a team of investment bankers who specialise in private equity transactions.

Sweden is introducing changes to a proposed EU directive that, if passed, would curb compensation for hedge fund and private equity managers by up to 60 percent in some cases.

Treating placement agents as lobbyists under California law would impose the proper limitations on the practice, CalPERS’ president Rob Feckner wrote in a letter to the pension’s board.

Hopes of a sustained recovery in the market were raised after Q2 figures showed the first increase in fund values since 2007, but recent history indicates that valuations may have to go through another period of declines before that happens.

Senator Chris Dodd has written a discussion draft of legislation that would only require hedge funds to register as investment advisers.

The House Financial Services Committee has passed a bill that would give state regulators authority over investment advisors with less than $100m in assets under management. Previously, the threshold was set at $25m.

A majority of US GPs expect carry to be taxed at an increased rate of 39.6%, which will hurt their ability to attract and retain talent, according to a recent survey.

An 'insider trading network' allegedly paid cash in exchange for tips on deals backed by Silver Lake, TPG, Hellman & Friedman and Blackstone. A former Ropes & Gray lawyer is among alleged conspirators.

New proposed guidelines released by the International Organisation of Securities Commission (IOSCO), which are intended to help reduce conflicts of interest at private equity firms, may also be used as a future reference point for regulators in both the US and Europe.

Big name venture capital firms have long enjoyed terms and conditions only dreamed of by their private equity peers. But now that returns are down and fundraising is slow, their LPs are demanding concessions on a number of fronts, which could dramatically reduce firms’ operating income.