The Benchmark Timing Mismatch For Performance Reporting On Private Equity Investments  April 21, 2021

To read the entire post click here.

Nearly a third (30%) of nonprofits recently surveyed said they plan to increase their allocation to alternatives in 2021, with another 65% saying their allocation will stay the same at a minimum. Within alternatives, use of private investments — specifically private equity — continues to grow, as more than three-quarters (78%) of not-for-profits that invested in alternatives allocated to that asset class.1

In speaking with the investment staffs of many large institutional investors, one common challenge heard repeatedly is performance reporting when it comes to private equity. The specific challenge is around how to address the benchmark mismatch for performance reporting, which increases in importance depending on how much of the overall portfolio the organization allocates to private equity.

Many investors use public market equivalents (PME) to benchmark private investments. While the valuation dates are consistent for the PME benchmarks, the same is not the case for the private investments. Reporting data for private investments often lag the valuation dates used for the benchmarks, resulting in a mismatch in the timing of when those values are calculated and the date used for benchmarking (e.g. quarter end).

To read the entire post click here.