For a private equity journalist, it is the gift that keeps on giving. Developments at once-celebrated emerging markets PE firm Abraaj Group have given the entire industry multiple wake-up calls.
Two aspects are notable for private funds CFOs. The first is what US authorities have said executives did with regards to valuations. Put simply, the allegation is that senior executives conspired to inflate valuations on certain portfolio companies to attract investor commitments to what was intended to be a $6 billion global fund. They succeeded in raising $3 billion. The whole affair points to a greater need for third-party involvement in valuations – so the third-party valuations experts say, anyway. We’d love to hear your views on this.
The second is Abraaj’s relationship with KPMG. As explored in this Financial Times article (paywall), there were multiple links between the two organizations, and when allegations of mismanagement of capital in its healthcare fund were made against Abraaj, it was KPMG the firm called on to exonerate it. The auditor gave Abraaj the all-clear on its management of the fund at the time, yet the allegations of misconduct have since pushed the firm over the edge. The episode suggests there should be some rules governing audits for the protection of investors.
On a separate note, we have just published a 17-minute discussion with Carlyle’s former chief information officer who is now an operating partner for the firm, Georgette Kiser. She has great insights into the risk associated with automation and how CIOs are becoming leaders of businesses.
Email compiled by Toby Mitchenall.