Dec 6, 2022 - Economy

New ILPA CEO on 2023 priorities, including tweak to proposed SEC rule

Illustration of two zig-zagging, upward, lines on a graph, one made out of money, and the other made out of red tape.

Illustration: Brendan Lynch/Axios

Jennifer Choi yesterday was named permanent CEO of the Institutional Limited Partners Association (ILPA), a trade group representing around 600 institutions that manage over $2 trillion in assets.

Why it matters: Choi, who had been acting CEO since June, now leads the only organization dedicated to foundational investors in alternative assets like venture capital and private equity. The endowments and pension funds and charitable foundations that pay their 2-and-20 in exchange for outsized returns (or so the theory goes).

  • Axios asked Choi about ILPA's top priorities for the coming year:

1. Regulation. ILPA is pleased with a series of transparency and standardization proposals from the SEC, but has a big nit with part of the private fund advisers rule proposed in February.

  • Specifically, the group opposes a provision that would prohibit certain types of side letters, and require general partners to disclose any preferential LP treatments to all current and prospective investors on a rolling basis and annually.
  • Choi argues that side letters are essential to certain LPs, which might be unable to otherwise invest. For example, a carveout for cannabis investments or an LPAC seat requirement. Moreover, the rolling basis disclosures could create time and cost burdens that either would be passed onto LPs or simply dissuade GPs from providing any sorts of side letters. ILPA, she says, prefers requiring a "most favored nation" process that it believes could meet the same disclosure goals.
  • Separately, ILPA also is asking the SEC to extend new quarterly fee and expense reporting requirements from the fund-level to the LP level upon request.

2. Structure: Alignment of interest between GPs and LPs has strengthened significantly over the past decade, but Choi says that the alt asset market's growth and innovation (e.g., private credit) has created new challenges in determining industry standard fund structures.

  • "You can have victories in some parts of the market but see zero movement or alignment in other parts," she explains.
  • One solution, she argues, is encouraging the return of in-person annual LP meetings. Particularly at this fraught moment, with LPs trying to better understand the status of the monies already invested.

3. ESG: Choi acknowledges that ESG means different things to different members, and that the "G" is rarely considered, but says ILPA must work to help LPs better reconcile their own commitments with those of their GPs.

Go deeper