51% of investment professionals said they see areas for improvement but do not believe private market issues are severe, according to a survey by the CFA Institute Research and Policy Center.
The survey revealed areas of key concern and solid majorities supporting regulatory requirements around quarterly statements, annual audits and an independent fairness or valuation opinion of any adviser-led secondary transactions.
According to the researchers, the results came amid increased global scrutiny of private markets, with the EU and the UK’s Financial Conduct Authority exploring regulatory enhancements for private asset valuation.
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However, 24% identified substantial problems, and 17% said they believe private markets function well. The top concerns were valuation reporting accuracy, performance measure comparability and fee transparency.
41% said they believe general partners (GPs) dominate negotiations with limited partners (LPs), though 38% said negotiating power varies.
Additionally, 52% said they support new, limited regulations focusing on required disclosures rather than prohibitions. Additionally, 70% back quarterly statements detailing fees, expenses, and performance, while 79% endorse annual audits by independent accountants. 61% expressed their support for fairness or valuation opinions of any adviser-led secondary transactions.
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The survey also revealed differences between GPs and LPs on fee and expense disclosures, with 51% of GPs finding them adequate, compared to only 42% of LPs.
Stephen Deane, CFA, senior director of capital markets policy at CFA Institute, commented: “While our members see room for improvement in private market practices, they do not perceive a market failure warranting drastic new regulations. Key concerns include valuation accuracy, performance measures and transparency, especially regarding fees and expenses.”
