Deals
Buyout Investor Group Advises Curbing Credit Line Excesses
- ILPA seeks better disclosure on loans designed to pump returns
- PE managers should clear loans within 180 days, group says
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For at least two years private equity firms have seized on a technique to artificially juice investment results. Now the main trade group for those firms’ investors says it’s time to curb excesses.
The Institutional Limited Partners Association issued guidelines Tuesday that take aim at buyout firms’ accelerating use of short-term bank loans, known as subscription credit lines, to defer -- often for months or even years -- putting money to work from the funds they manage in completed acquisitions. Investors in buyout funds traditionally have had to pony up when deals closed, but delaying that inflates a key benchmark for the firms with little benefit for clients.