Private Equity Fees - a glimpse behind the curtain!

Most end investors - and even their often gullible fiduciaries acting as 'limited' partners in the Private Equity investment vehicles - are blissfully unaware of the myriad of fees that are charged to the funds they are invested in. So the current spat between some Private Equity big wigs allows a peek into this opaque world. Given that the disputed fees relate only to the money invested by three officials of the funds one can imagine the amount of money that was charged to the proportionally much larger amounts coming from the 'limited' partners (ultimately Joe Sixpack). Surprisingly the critics of executive pay in listed companies are mostly (all?) silent on the goings-on in the 'discreet' world of (not so) 'Private' Equity where most of the money really is invested on behalf of the general public. (16-Nov-2017)
Marketwatch


Level of Executive Pay is not addressed!

All very well when some 'Big Names' from the Corporate Governance Crowd point out that pay structures should encourage longer-term thinking in the C-Suite (how long is long enough though). But I still think that the question of absolute pay levels also need to be addressed. Otherwise ANY amount of compensation could be justified if the company has performed well enough. (15-Nov-2017)
Financial News (Pay Wall)

One more nail in coffin for Exec Pay Schemes

No surprise about this report, the logic of Executive Pay Schemes for the few are already discredited. What is needed is action by the top investment fiduciaries, i.e. the largest investment funds, private banks, pension funds and insurance companies. No need for Proxy 'Advisers'. (7-Nov-2017)
Marketwatch

Chairmen - expensive decoration?

If the USA gets by without expensive chairmen, why keep them in clover here in the UK? Just a retirement bounty for the old boys? (6-Nov-2017)
Bloomberg

Bloomberg Chairman sits on Glencore Board

This creates not only a potential governance problem, it also means that the Public cannot be 100% certain that reporting is conducted on arms-length basis. Not without reason a wise man once said that freedom of speech (and media) means that 200 (very) rich can say what they want. Read the last line of this article!
(6-Nov-2017)

Major Fund Managers to collaborate on Governance

David Walker, a so-called City 'Grandee', suggests in a recent article that major fund managers should extend and intensify the practice of collaboration in order to improve shareholder stewardship. While this is going in the right direction - Pro Governance has for a long time argued that corporate governance can be decided if the top 30-40 investment institutions get around a table - it leaves open the question of how this collaboration should be organized (and more importantly, how its effectiveness should be monitored and judged).
In my opinion, the practice of meetings behind closed doors and endless discussions on an ad-hoc basis would not be acceptable. Only clear and public rules would be able to provide an effective way to police thousands of companies. This would also play into the hands of Mr. Walker's second suggestion, the monitoring of the activities of fund managers with respect to their governance practices.
But in both cases it requires the involvement of the (real) end investor, the savers that invest with pension funds, mutual funds or private banking firms. A survey of fund managers might be a worthwhile endeavour but not if it is just a box-ticking exercise without any further consequences.
Whether the improved shareholder stewardship will lead to greater economic productivity is something that is being discussed (especially in the United Kingdom) for more than 30 years. Intuitively one might think (and hope) so but it if far from being proven, Japan, Korea have done extraordinarily well for long periods of time and their governance practices were (and are) far from perfect.
Your comments please! Or is Corp Gov just a game played for and by insiders?
(4-Nov-2017)

Multiple Share Classes - Easy Solution

While MSCI mulls over what to do about Multiple Share Classes I see an obvious solution: publish indices with and without these shares and give the investors the choice of yardstick they prefer.
But give end investors the same option, so ask pension fund sponsors and clients of mutual funds and private banks which index they want to have used as a benchmark. (3- Nov-2017)
Bloomberg

Shareholder loans, Private Equity and Distressed Investing - change needed

Some call Private Equity and their close cousin, distressed debt investors, nothing but locusts that are out to make a fast buck. This judgment may be overly harsh, but given the short time between investment and exit that is the hallmark of some deals it may be difficult to disprove this judgment.
One are of possible abuse, however, is the treatment of shareholder loans when an investment hits the buffers. Loans from major or especially controlling shareholders should be treated as subordinate to all other claims, pensions, wages, trade creditors and tax authorities.
In the case of Private Equity 'Funds' it should also not be possible that the Fund washes its hands of an investment that had gone sour. The Fund should be treated as a going concern, much like a Conglomerate. This would instill a much higher level of commitment from the PE investors and prevent overly risky investments on the basis of 'heads we win, tails you loose'. (22-Oct-2017)
Sunday Times (Paywall)

Socially Responsible Investing - Just a Fig Leaf?

While it may hurt investors in the pocket, are they not the ultimate responsible party on the way to socially responsible business practises? If yes, can they stay aside when a company tries to squeeze the last dollar out of its product, however reasonable the may be following simplistic principles of capitalism? Or should there be some restraint based on ethical consideration even if it if against full-out profit maximization? What would one say if doctors create a monopoly in heart operations and use every possible legalistic trick to prevent competition thus being able to increase their fees to some astronomical level?
(18-Oct-2017)
Bloomberg

Acquisitions, M+A need more supervision by Shareholders

Another desastrous Acquisition, another fine - but for the wrong victims, i.e. the shareholders. M+A merchants, aka 'Investment Bankers', auditors and possibly management should pay for such failures.
(18-Oct-2017)
BBC