A recent Securities and Exchange Commission proposal to increase required transparency for private funds will “change the nature of private investing,” one University of Texas professor said.
Ken Wiles, executive director of the Hicks, Muse, Tate and Furst Center for Private Equity at UT at Austin, said the benefits of private investing are being able to capture more value from investments and focus on operations, without giving up information to potential competitors. Wiles said that increased disclosure could be beneficial to some limited partners, but that the extent of the proposed regulations could have negative effects on firms without equally positive effects for investors.
“There’s this balance,” Wiles said. “Why should we force somebody that’s been very successful as a general partner to change their operations? If the LPs (limited partners) have been satisfied with the returns, are happy to continue writing checks, that’s a private agreement between those LPs and those GPS (general partners).”
He added that expanding accessibility in private markets is important, but doesn’t think this proposal will expand limited partner involvement in private funds, and could even decrease it.
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