- In search of inappropriate fees and expenses
- SEC found problems in more than half of firms
- Other LPs also performing exhaustive reviews
“The SWIB Private Equity and legal staff are addressing [these issues] contractually while also engaging in additional conversations and diligence with SWIB’s private equity advisors and other similarly situated investors,” according to a board memo made available to sister website peHUB.
“Staff is also continuing to work with SWIB’s private equity consultant to address the issues of private equity fees that may be hidden from investors and the ‘invisible’ shifting of expenses from advisors to investors,” the memo said.
Vicki Hearing, a spokeswoman for the agency, did not respond to requests for comment. As of Dec. 31, 2013, the investment board managed more than $100 billion in assets.
Earlier this year, Andrew Bowden, director in the SEC’s Office of Compliance Inspections and Examinations, disclosed that the SEC found “violations of law” and “material weaknesses in controls” involving fees and expenses in more than half the firms it had examined. Bowden rocked the industry with his assertion of widespread abuse.
At the time, the industry waited to find out if the SEC was going to slap a big firm for charging improper fees and expenses, but that has not happened. The commission indeed found bad behavior at some smaller, lesser known firms, but no headline grabbing investigation has yet emerged.
Other LPs, including the California Public Employees’ Retirement System, have performed exhaustive reviews of private equity fees and expenses. The Washington State Investment Board has an extensive process that tests key terms and conditions of investment agreements “to ensure that our investments are being managed in accordance with the agreements’ provisions,” Liz Mendizabal, spokeswoman for Washington State, told peHUB in a prior interview.
Chris Witkowsky is editor of peHUB.