Top Ranked Investment Risks according to LPs

LP Dealbreakers: Lack of Integrity and Intransparency

by

June 4, 2015

Institutional investors and LPs are more interested than ever in the impact of private equity far beyond its outperformance of other asset classes. Two new studies provide insight into the trend. PWC says that seven out of ten institutional investors will decline to take part in a private equity fund raising or would turn down a co-investment based on “environmental, social and governance risk grounds”. Exactly, how investors view the risk varies depending on whether the LP is a pension fund, family office, charity endowment or investment bank, according to the latest issue of the RRiPE Index, covering factors that affect decision-making. Geography also plays a role. Pension funds were the most concerned with ESG, rating issues more highly than family offices and private banks did. Interestingly, Asset Stripping, an activity that is often attributed to PE in the media, tended to rank towards the bottom for all groups except financial institutions. Family offices and private banks were least concerned by asset stripping. Looking at the same report, PE Hub pointed out that LPs are more worried about bribery than hazardous waste.

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