The New Activists
March 16, 2010
Last September, when the Institutional Limited Partners Association, unveiled a set of guidelines for the private equity industry, sponsors likely had an idea that the power had shifted in the LP/GP relationship.
The wide-ranging directive, in particular, took issue with the possibility that GPs would pass along higher taxes to their limiteds and sought to strengthen clawback agreements.
GPs probably knew a shift was coming, but it's unlikely they foresaw limiteds taking more of an activist approach. Unfortunately for sponsors, that seems to be the direction LPs are taking.
This morning the New York Times reported that The California Public Employees Retirement System (CalPERS) eliminated the cap governing the number of shareholder proposals the pension can make in a given year. This largely affects public companies, but could also have an impact on its large private equity portfolio.
The decision follows efforts from the Ohio Public Employees Retirement System (OPERS) earlier this month to take Permira to task for the firm's decision to shutter an Ohio-based Hugo Boss manufacturing facility.
In the past, GPs would probably just exclude these limiteds from their next fundraise. With capital so difficult to find, however, most probably don't have that luxury. A corrollary is going to be a new era of second guessing from limiteds.
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