ILPA updates reporting guidelines to improve transparency

January 23, 2025 (Preqin News) – The Institutional Limited Partners Association (ILPA) has issued new reporting guidelines to standardize financial reporting for private capital fund managers, in a bid to improve transparency around fees, expenses, and carried interest.

The updated ILPA Reporting Template will require GPs to add details on offering/syndication costs, placement fees, and partner transfers. Legacy funds, where the investment period ends before the start of 2026, will not have to use the new guidelines.

Fee transparency is a key issue, particularly for smaller LPs who can pay higher management fees than bigger investors, who have stronger relationships with GPs and can secure size discounts.

Other new additions include third-party expenses, subscription facilities fees and interest, and insurance fees. In total, GPs will have to report on 22 partnership expenses, up from nine. The new guidelines will also require GPs to be more transparent about the fees they charge portfolio companies.

'We've seen a migration away from things that used to be covered by the management fee and are now being charged to the fund as a partnership expense. And, moreover, some of these fees relate to things that are being executed by the internal staff of the GP. So, theoretically, you'd imagine this would have been covered as part of the overhead that falls within the conventional idea of a management fee,' Jennifer Choi, CEO of ILPA, said in an interview with Preqin. 'I think LPs are understandably questioning the economic model and whether it really is still anchored in that principle of alignment and mutual success over the life of the fund.'

The ILPA Reporting Template was first developed in 2016 to standardize reporting practices for GPs. Since then, practices around private equity’s fund economics, GP disclosures, and a wider array of service providers in the alternatives industry has prompted a more granular approach to reporting.

Investors are allocating ever-larger amounts of capital to alternative asset classes and want the appropriate information to allocate in terms of risk and to justify costs to their stakeholders. Allocations from the top 100 US pension funds, which have total assets of $5.26tn, to alternative asset classes have risen from 23% in 2013 to 34% in 2024, according to Milliman’s Public Pension Funding Study.

ILPA says the new guidelines will provide LPs with insight into the direct costs of participating in a given fund, and a schedule of fees and reimbursements received by investment advisors or related persons.

The new performance submission stipulates that GPs should provide net IRR and TVPI (total value to paid-in capital) with and without the impact of fund-level subscription lines, which have become more common as GPs look to return capital to investors and enhance fund returns.

For feeder funds, ILPA says that reporting should both represent the feeder’s ‘direct fees and expenses and its allocation of the master fund’s fees and expenses with the same line-item description'.

ILPA launched the new reporting project, known as the Quarterly Reporting Standards Initiative in January 2024. The investor body consulted private capital players including CalPERS, Vista Equity Partners, and Reverence Capital to ensure a range of perspectives was taken into account when shaping the new guidelines.

(Update: This story has been updated with commentary from ILPA in paragraph 5.)

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