“Given the type of information we’re finding on PE funds, PE funds of funds might be in for a rude awakening as large investors discover that some have a different standard of due diligence than their hedge fund counterparts.”
In Q1, the firm initiated four times as many reports on PE funds for various clients as it had in Q1 of 2014.
BackTrack, which for years has specialized in conducting background checks on hedge fund managers for institutional investors, began seeing an increase in interest from clients towards the end of 2014 and this swelled beginning in January 2015.
“We usually investigated PE funds for clients on a one-off basis,” said BackTrack executive vice president Randy Shain. “Now many of these same clients are coming to us with multiple requests a month.”
The results have been striking as well. In 83 percent of the investigations, BackTrack found litigation naming either the fund or the individual subjects. The litigation has included discrimination suits, a lawsuit by a former employer seeking $10 million, a suit regarding a fund’s portfolio company's IPO for allegedly issuing "materially false and misleading statements” and multiple allegations of “securities fraud.”
“PE firms generate a lot of information, whether it’s news about their portfolio companies or litigation involving its own employees,” Shain said. “Investors need to be aware of everything that’s going on before they commit to these long lockups.”
Despite seeing an increase from its clients, Shain said more traditional PE fund of funds have been somewhat reluctant to follow along. While many of these firms conduct some due diligence, it is often much more limited in scope than BackTrack’s investigations. He added that PE fund of funds could find themselves facing competition as others enter the private equity space.
“Many large investors are starting to see that this type of background due diligence is the norm,” Shain said. “Given the type of information we’re finding on PE funds, PE funds of funds might be in for a rude awakening as large investors discover that some have a different standard of due diligence than their hedge fund counterparts.”
ROCKVILLE, Md. & ZURICH--(BUSINESS WIRE)--Institutional Shareholder Services Inc. (ISS), a leading provider of corporate governance and proxy voting solutions to the global financial community, and RepRisk, a leading business intelligence provider specializing in dynamic environmental, social, and governance (ESG) risk analytics and metrics, today announced a strategic partnership allowing ISS to offer ESG solutions from RepRisk.
“Critically, RepRisk offerings will assist ISS clients in selecting the best performing portfolio constituents for their beneficiaries, and facilitate compliance with U.N. PRI and other ESG investing stewardship guidance now gaining traction with investors.”
Effective today, ISS will offer clients – including asset owners, investment managers, hedge funds, broker-dealers, and custodian banks – access to RepRisk’s Asset Management Platform, Data Feed, and Monitoring Report offerings. Using the platform, clients can better manage reputational, compliance, and investment risks related to ESG issues. As a screening tool, the platform can also be used to dynamically monitor portfolio companies’ activities for purposes of investment analysis, engagement, or exclusion. In addition, customizable data feeds can be integrated into existing databases and processes, to systematically flag and monitor ESG risks in a portfolio.
“As a growing number of institutions, globally, sharpen their focus on non-financial risks, our clients will benefit greatly from access to RepRisk’s research, data, and analytics,” said ISS Chief Revenue Officer Stephen Harvey. “Critically, RepRisk offerings will assist ISS clients in selecting the best performing portfolio constituents for their beneficiaries, and facilitate compliance with U.N. PRI and other ESG investing stewardship guidance now gaining traction with investors.”
RepRisk harnesses a proprietary, systematic framework that combines technology and hands-on human intelligence in 15 languages to deliver risk information on over 55,000 public and private companies worldwide. Since 2006, RepRisk has built a comprehensive ESG risk database that serves as a due diligence tool and “early warning” system in risk management, compliance, investment management, corporate benchmarking, and supplier risk.
“We welcome the opportunity to partner with ISS and provide its clients deep insight into ESG-related risks not always visible through traditional avenues of public company mandated disclosures,” said RepRisk CEO Philipp Aeby. “We are pleased to partner with ISS, the leader in corporate governance, in delivering extra-financial insight to the investment community.”
ISS, founded in 1985 as Institutional Shareholder Services Inc., is the world's leading provider of proxy advisory and corporate governance solutions to financial market participants. ISS' services include objective proxy research and analysis, end-to-end proxy voting and distribution solutions, turnkey securities class action claims management, and reliable governance data and modeling tools. Clients rely on ISS' expertise to help them make informed corporate governance decisions. ISS is a global company with more than 800 employees spread across 15 offices in 10 countries. ISS covers approximately 38,000 companies in 115 countries, delivering proxy research and vote recommendations on nearly 28,000 companies each year and working closely with clients to execute more than 7.5 million ballots representing 4 trillion shares. Our flexible coverage universe expands correspondingly with our clients’ holdings. ISS analysts have unique expertise and insight on the governance landscape, local market voting practices and regulatory requirements, along with expertise in varied fields such as law, M&A, compensation, and analytics. For more information, please visit www.issgovernance.com
RepRisk is a leading business intelligence provider, specializing in environmental, social, and governance (ESG) risk analytics and metrics. Harnessing a proprietary, systematic framework that leverages cutting-edge technology and hands-on human intelligence in 15 languages, RepRisk curates and delivers dynamic risk information for an unlimited universe of companies. Since 2006, RepRisk has built and continues to grow the most comprehensive ESG risk database that serves as a due diligence, research, and monitoring tool in risk management, compliance, investment management, corporate benchmarking, and supplier risk. The database currently includes risk profiles for over 55,000 public and private companies, 14,000 projects, as well as for every sector and country in the world. Headquartered in Zurich, Switzerland, RepRisk serves clients worldwide helping them to manage and mitigate ESG and reputational risks in day-to-day business. RepRisk provides the transparency needed to enable better, more informed decisions. For more information, please visit www.reprisk.com.
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