It comes as little surprise that US Senator Elizabeth Warren’s proposed Stop Wall Street Looting Act has fund managers on the defensive. However, investors are presenting a less united front.
As we approach what could prove to be a decisive election year for the asset class, sister publication Private Equity International quizzed 146 institutional investors for its LP Perspectives Survey to ascertain where they stand on the Democratic presidential hopeful’s proposals.
Respondents were keen to prohibit deals for LPs that are not offered to all investors, with 20 percent strongly in favour and a further 19 percent somewhat so. The stance comes amid growing LP appetites for co-investments, which an increasing number of investors are relying upon to generate alpha.
An end to GP monitoring fees proved the most popular suggestion, with 46 percent either strongly or somewhat in favour and just 22 percent opposed.
LPs were most opposed to stopping the tax deductibility of interest payments, which could hinder returns. Some 62 percent were either somewhat or strongly against the idea, while only 11 percent were in favour to some extent.
The survey follows a November report by the US Chamber of Commerce, one of Washington DC’s most powerful lobbying groups, which analysed the potential economic impact of the act were it to come into effect. In the report’s worst-case scenario, “the industry would cease to exist, companies normally backed by PE would fail, and the national workforce would drop by 26.3 million jobs.”