Listed private equity tackles European directive

Legislation to make the buyout industry and hedge funds more transparent will duplicate their reporting standards and add unnecessary cost, listed private equity groups have told European lawmakers.

“To add an additional level of valuation exercise every quarter is just lunacy,” said Brian Scouler, a director of Dunedin Enterprise, one of a group of listed private equity trusts to write to members of the European parliament.

In their letter, they argue the draft directive will add unnecessary cost and duplicate existing legislation by requiring funds to value their portfolio quarterly and have those valuations independently audited.

The listed private equity groups also threw their weight behind the Association of Investment Companies, the industry body for all listed funds, which has demanded investment trusts be excluded from the planned Alternative Investment Fund Manager (AIFM) directive.

Joining Dunedin in writing to lawmakers were Electra Private Equity, Pantheon, JZ Capital Partners and Graphite Capital.

The recipients included Sharon Bowles, chair of the economic and monetary affairs committee, and Jean-Paul Gauzes, the person in charge of seeing the legislation through parliament. Gauzes’ report on the draft directive, due later this month, is seen by some opponents of the directive as being highly influential in securing changes to the text.

Having auditors recheck company valuations could add up to £1m over the lifetime of a fund, said Scouler, a significant amount to a small buyout business focusing on deals typically under £50m in size.

Listed private equity firms already conduct audited portfolio revaluations every six months, in line with other public companies.

“Private equity trusts disclose a lot of information and probably lead the way on being public — that is ignored,” said Ian Armitage, chairman of HgCapital and chairman of the Listed Private Equity Association, the body to which all the letter writers belong, but which did not coordinate their actions.