By Bronwyn Bailey, Vice President Research, Private Equity Growth Capital Council (PEGCC)
Private equity’s narrative has typically centered on its entrepreneurial founders and savvy dealmakers. Individuals in the so-called “back office” kept accurate accounting and made timely limited partner (LP) communications but were rarely given the spotlight. Changes brought by the global financial crisis and the industry’s maturation have increased the prominence of these roles. The Private Equity Growth Capital Council (PEGCC) has responded by offering more resources and educational settings to assist the development of these roles.
One of the biggest shifts in the U.S. private equity industry is the requirement that firms with over $150 million in assets register with the SEC. Firms must now document their compliance programs and undergo SEC exams. In response, many firms in the industry have hired Chief Compliance Officers (CCOs) to oversee compliance. Compliance is one of the most discussed topics in the industry, and the reason why the PEGCC created a CCO Working Group, where experts and CCOs meet regularly to convey best practices.
Chief Financial Officers (CFOs) have always been responsible for fund accounting, capital calls, and portfolio company valuations. Today, CFOs may be asked to lead the implementation of IT systems to ensure cybersecurity and to choose software to expedite the transmission of fund financials to LPs. Increasingly, CFOs are also playing a role in compliance, particularly concerning company valuations. CFOs’ oversight of these additional areas motivated the PEGCC to create an annual CFO Day as a forum for peer sharing and professional insights.
Since the financial crisis, fundraising has become more difficult. In addition to heightened competition for capital, Investor Relations (IR) professionals must navigate market dynamics while also managing longer due diligence periods, supplementary LP requests, ESG requirements, and new regulatory regimes, such as AIFMD in Europe. The additional demands quickly expand the role’s scope. By organizing IR Committee meetings to discuss these challenges and seminars to help develop, implement, and advance ESG initiatives, the PEGCC is supporting the professionalization of this evolving role at private equity firms.
While the reputation of a firm is driven mainly by the success of its portfolio companies, a strong back office sets apart firms that can more easily adapt to an evolving business environment. The PEGCC is there to help our members steer through these changes.
Bronwyn Bailey heads the Research team at the Private Equity Growth Capital Council (PEGCC). She has been conducting research and analytics for business engagements for almost 15 years. Prior to joining the PEGCC, she managed an analytics team at BlackRock to optimize marketing efforts and promote asset growth of iShares ETF products. She was formerly the research director at SVB Capital, the private equity division of SVB Financial Group. Bronwyn is speaking at the inaugural SuperReturn CFO/COO Forum in Amsterdam, 29 September – 1 October.