Back to School: Regulatory changes seen key factor for PE in next year

  • 88 pct said they were more operationally focused today than three yrs ago
  • 40 pct picked credit as the area with the biggest opportunity for growth
  • 35 pct said buyout/VC was area with largest growth opportunity

With the fate of the Affordable Care Act hanging in the balance, regulatory changes are expected to be the biggest factor to affect private equity in the next year, a survey from SS&C Technologies Holding says.

Roughly half, or 47 percent, of executives questioned said pending legislation would have the largest effect on PE. Transparency came in second with 27 percent, while 18 percent of respondents cited human-capital management. Eight percent cited data management and security as affecting PE the most in the next year, SS&C said.

SS&C, Windsor, Connecticut, provides investment and financial software-enabled services for the financial-services industry. SS&C questioned about 100 GPs, which included its private equity customers and attendees of the 2017 SuperReturn International conference in Berlin in late February, to compile the survey. More than half the respondents, 55 percent, were GPs, 17 percent were LPs and 3 percent were at law firms.

Last week, House Republicans moved to gut the Affordable Care Act, or Obamacare. The House narrowly passed the GOP’s American Health Care Act and sent the bill to the Senate, which has expressed concerns about the legislation. President Donald Trump has vowed to repeal Obamacare, which he has said was “imploding,” press reports said.

House Republicans last week also approved legislation to repeal much of the Dodd-Frank Act, which Democrats enacted after the Great Recession. Trump has also pledged to dismantle Dodd-Frank, which he has called “a disaster,” according to press reports.

Some 88 percent of respondents said they were more operationally focused today than they were three years ago, while 12 percent said they were not. Only 17 percent, however, cited regulatory changes as the motivator behind their increased focus on operations.

Demands from LPs and enhanced reporting requirements are driving firms to be more operationally focused, SS&C said. Investors are seeking separation of duties and built-in transparency to the accounting and reporting process, SS&C said.

“This helps to protect investors’ interests within the framework of the limited partnership agreement and allows private equity firms to focus on their core competencies — the effective management of investments and safeguarding of capital,” the financial software firm said.

Asked which strategies posed the biggest opportunity for growth in the years ahead, 40 percent picked credit. Another 35 percent chose buyout/VC and 13 percent picked real estate. Infrastructure came in last with 12 percent, SS&C said.

Action Item: Contact SS&C CFO Patrick Pedonti at +1 860-298-4738. See the survey results here.

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