Earlier this year, ILPA launched the Quarterly Reporting Standards Initiative (QRSI) to deliver the next evolution of ILPA templates in accordance with requirements outlined in the U.S. SEC’s Private Fund Advisers (PFA) rule, which addresses quarterly reporting on fees and expenses and performance and cash flows.

Following months of intensive collaboration with industry partners, ILPA is preparing to release an updated ILPA Reporting Template as well as new templates developed to capture performance metrics and cash flows, for a public comment period in late May.

“We’re incredibly grateful for the time and effort our member LPs and industry partners are dedicating to this important effort,” said Neal Prunier, ILPA Managing Director of Industry Affairs. “The collaboration and thoughtfulness we’ve experienced thus far when working through this project has been tremendous. There’s still time for those in our community to get involved, whether through joining one of our satellite groups or participating in our comment period kicking off later this month.”

Get to Know the Industry Partners Leading this Work

Since the initiative’s beginning, ILPA has engaged with hundreds of global representatives from across the industry, including LPs, GPs, Fund of Funds, Fund Admins, Consultants and other groups impacted by the PFA rule. These groups are represented across two dedicated working groups, which meet weekly to drive progress on updates to the templates and associated guidance, along with a steering committee, which meets monthly to help oversee QRSI activities. The initiative also includes a set of satellite groups segmented by organization type, each of which meets monthly with the QRSI team to discuss initiative topics.

Workstream 1: Fund Fees & Expenses

Includes representation from:

• Citco
• Colmore
• Gen II
• State Street
• SS&C
• SEI
• Albourne
• Certares
• Reverence Capital
• AP6
• State of Wisconsin Investment Board
• Teacher Retirement System of Texas

Workstream 2: Performance

Includes representation from:

• Gen II
• State Street
• CSC
• Albourne
• Cambridge Associates
• ACA Group
• Certares
• Oaktree Capital Management
• Searchlight Capital Partners
• Vista Equity Partners
• Washington State Investment Board
• M&G
• Temasek
• Commonwealth of Pennsylvania Public School Employees Retirement System

The ILPA QRSI Steering Committee has also proven invaluable for oversight and decision-making on topics of divergence, including consolidated groupings for advisor compensation line items and offsets/rebates/waivers, as well as optimal presentation of fund- and investment-level cash flows.

Steering Committee

Includes representation from:

• State Street
• Cerberus
• CSC
• Vista Equity Partners
• Searchlight Capital Partners
• Asia Alternatives
• Teacher Retirement System of Texas
• CalPERS
• State of Wisconsin Investment Board
• CDPQ
• Commonwealth of Pennsylvania Public School Employees Retirement System

Reaching Consensus around Fund Fees and Expenses and Performance and Cash Flows

After dozens of discussions and dedicated work sessions, the QRSI team has reached consensus on numerous key decisions pertaining to fund fees and expenses, performance metrics and cash flows, including:

• Defined requirements for new Advisor Compensation section and narrowed list of line items to ten core internal costs charged back to the fund
• Achieved consensus on 30+ partnership expense line items and associated groupings
• Reached agreement on presentation of offsets/rebates/waivers in the ILPA Reporting Template
• Achieved consensus on calculation of fund-level performance metrics, including both gross and net IRR as well as gross and net MOIC
• Drafted fund-level cash flows table with key inputs related to credit facilities

The forthcoming public comment period will allow the industry to review the updated templates and provide feedback on proposed changes via surveys and other one-off outreach.

Capturing the Global Perspective

While the majority of participants in the initiative work out of the U.S., the PFA rule’s global impact means involvement by representatives from Europe and Asia has been critical.

Quarterly reporting is a staple of LP-GP dynamics around the globe and this project is designed to standardize reporting across geographic borders to create consistent transparency for all investors.

While the SEC regulates U.S. jurisdictions, and the QRSI team has leveraged U.S. Generally Accepted Accounting Principles (GAAP) reporting standards on various elements of the updated templates and associated guidance, the QRSI team also intends to embed corresponding international standards such as International Financial Reporting Standards (IFRS). Ultimately, the updated templates will be structured to align with both U.S. and non-U.S. reporting standards wherever possible.

For example, most recently, several satellite groups were surveyed on fund definitions in alignment with U.S. GAAP and any alternative perspectives using international standards. As these solutions are explored further, ILPA will continue to seek out international perspectives and would welcome increased participation from organizations operating in Europe and Asia.

During the public comment period, ILPA will solicit feedback broadly across geographies, ensuring that all members have an opportunity to provide recommendations on the new and updated templates.

Impact of Litigation on the Effort

While ILPA works to have the updated templates and accompanying guidance complete this summer in line with SEC requirements, the PFA rule is tied up in the U.S. court system.

“Regardless of the outcome in the Fifth Circuit, including if the litigation results in the PFA rule being vacated, ILPA will press ahead with this effort and our plan to release updated templates to the industry,” said Prunier. “We’re continually working to increase transparency and alignment of interests across PE, and this project is central to that.”