Reporting to your Investors

Your fund has held a first close and you have some money in the ground, having executed your fund’s first deal. Now you need to start thinking about how you report on your activity to your investors. Of course, your latitude here is limited: the Limited Partnership Agreement (LPA) for your fund will detail what is required when it comes to reporting, including provisions around the timing of reports (how frequently; when after the reporting end date they need to be sent); valuations; drawdown notices; annual meetings; meetings of the fund’s Limited Partner Advisory Board (LPAB) and so on.

Beyond what is stated in the LPA, fund managers are well advised to keep in mind the two cardinal rules for reporting:

  1. Transparency; and
  2. Investors hate surprises!

Fund reports

Quarterly reporting is now the standard and semi-annual reporting, whilst still seen, is nowadays very rare. Monthly reporting and the attendant valuation work required does not make sense in a private equity context, even if a manager’s or the fund administrator’s systems and processes would support it.

The specifics of fund reports vary from manager to manager, with the level of detail, quality and user-friendliness varying greatly across the industry. Whilst industry bodies such as the British Private Equity and Venture Capital Association (BVCA), the European equivalent, InvestEurope, and the Institutional Limited Partners Association (ILPA), have produced templates and best practice guidance, there is, as of yet, no universally approved “standard” reporting template.

Nonetheless, the majority of fund reports will include fund-level information (drawdown and distributions and net performance numbers) and information on portfolio companies (at the least a summary table, but more detailed deal summaries are increasingly the norm). There will also usually be a section showing fund assets split by investor (often as a table but anonymised to Investor 1, Investor 2, etc., but some managers provide just a personalised page for each investor).

There will usually also be deal-by-deal write-ups/commentary, normally prepared by the investment team. It is also typical for a Managing Partner or other senior member of the leadership to write a short commentary on market conditions, key activities in the last quarter, and so on, for inclusion at the beginning of the report.

Transparency is the watchword and many managers add more information (such as a balance sheet, P&L, cash flow for the fund etc.) than you would expect to find in a company’s reporting.

Increasingly, environmental, social and governance (ESG) provisions and issues will be included and may be mandated by particular investors.

Annual reports

Usually follows the same lines as a quarterly report but will contain audited valuations and the narrative sections may be more detailed.


Valuations are usually performed by the manager, sometimes supported by the fund administrator and/or specialist advisers. Whilst performed by the manager, it is important that the approach is agreed with a fund’s auditor.

Valuations are normally unaudited until the annual report. The guiding principles are consistency and conservativeness. Most valuations in a private equity context are now performed on a fair value basis and in accordance (to a lesser or greater degree) with the ILPA valuation guidelines.

Drawdown notices

These can often be a method of reporting to investors. The LPA (or alternatively, side letter agreements with specific investors) may mandate that a drawdown notice provides more than the bare demand for capital and must provide additional information on the target company for which the drawdown relates to.

Role of the Fund Administrator

The role of the fund administrator is to do the accounting for the fund, take the valuations and the deal write-ups and fund accounting and merge this together into the right format (typically, based on one or more of the templates mentioned above).

Often, the fund administrator will also distribute the reports. Whilst this is sometimes still done via hard copies, increasingly it is managed electronically. Distribution via some form of investor reporting portal (such as Investran DX, eFront or Intralinks) is best practice, rather than via email. The latter comes with obvious security considerations and use of an electronic portal is generally considered much more secure, as well as allowing a repository of relevant documents going back in time to be built and provided to investors. This can include fund materials and documentation, such as the LPA and PPM; financial statements such as capital account statements; tax information; annual meeting materials; drawdown and distribution notices; along with quarterly and annual reports.  The portal can also give Investors and fund managers direct access to interactive dashboards and fund and Investor level data to illustrate fund performance and allow for greater oversight and engagement.

Fund closed, deals done and investors well-informed…what’s next? Starting the whole process again, of course, and we will look at some of the considerations regarding when and how you should get that particular ball rolling in our next article, our final one in this series.