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| Strategic Investment Funds
BOX 7.3
Invest Europe Handbook of Professional Standards 2018: Investor reporting guidelines Invest Europe (2018) guidelines suggest the following reporting structure for private equity and venture capital funds, on a quarterly basis.
• Related party transactions and conflicts of interest. Overview of such relationships and their resolution Investment portfolio information
Fund information • Fund overview. General information on the fund, investment focus, key economic terms for the general partner, fund operations, and governance • Executive summary. Commentary on key developments, investment and activities, performance, and material changes • Fund performance status. Information required to assess fund performance, including total commitments and paid-in capital, total investments, cumulative distributions to investors, cumulative management fees drawn, total net asset value, and gross and net internal rate of return • Fund financial statements. Fund income statement, balance sheet, cash flow statement, summary of accounting, and valuation policy • General partner fees, carried interest, and fund operating expenses (audit, tax, legal, and so on) • Fund bridge and leverage facilities. Disclosure including identity of entities providing facilities, key terms, drawdowns, and interest incurred
• Portfolio summary. Information on individual investments including holding period, geography and sector, and total returns • Portfolio asset detail (semiannual, with quarterly updates). Detailed quantitative and qualitative information on each of the fund’s current portfolio companies, assets, and funds, and valuation and methodology used Investor information • Capital account. Current and cumulative information on each limited partner’s individual commitment in the fund, allowing for analysis of income and capital allocations • Drawdown notices (per transaction). Accompanied by note on how funds will be used • Distribution notices (per transaction). Accompanied by note with details on assets divested
Source: Invest Europe 2018, section 5.
In addition, SIFs as (partially) publicly owned entities are called to higher standards of disclosure based on changing reporting norms for state-owned enterprises (SOEs) worldwide. As a sovereign or quasi-sovereign entity, the SIF generally has higher public disclosure obligations. As the Organisation for Economic Co-operation and Development points out in the case of SOEs, for instance, government vehicles pursuing public policy objectives have a high level of disclosure obligation because these entities can have significant budget, fiscal, and social impacts (OECD 2016). The 2015 OECD Guidelines on Corporate Governance of State-Owned Enterprises is based on the underlying principle that SOEs are required to be transparent to the public (OECD 2015). The guidelines therefore call for reform efforts by governments to create robust transparency frameworks within the SOE sector and recommend high standards of disclosure, such as adhering to international accounting standards and conducting external audits of financial statements (OECD 2016). Given this overall context, it is no surprise that transparency and disclosure of sovereign investment agencies is a richly discussed area of work, with multiple methodologies devoted to dissecting the elements of transparency, ranking
