More than half (57%) of the private equity industry executives polled by KPMG said that complying with new regulatory standards is a “difficult, time-consuming process,” according to a survey taken by the US audit, tax and advisory firm, compared to just 43% of respondents last year.
The survey, conducted at the Dow Jones Private Equity Analyst Conference last week, found that 51% of the respondents thought adhering to the new regulations was difficult. Another 31% described the process as “mildly intrusive,” and only 17 % of executives thought of it is a nonissue.
“Now that there is greater clarity around regulatory changes, it’s not surprising that more PE executives are finding the regulatory process more difficult than previously thought,” says Marc Moyers, national sector leader for KPMG’s US Private Equity Practice. “Even the large PE funds that had compliance processes in place are finding that they need to add dedicated resources to regulatory compliance, which has become yet another cost of doing business in this industry.”
When asked what area of the federal government most impacted the private equity industry, 42% of executives cited the recent Dodd-Frank regulation, while 31% said indecision on the debt crisis made the biggest impact. Healthcare reform was a distant third with 14% of respondents.
Executives were split when asked hypothetically about their fundraising optimism, with 36% of respondents saying they would be less confident about the prospect of raising a fund today than they would have been a year ago, while almost the same number (35%) said they would be more optimistic than a year ago. Close behind at 30% were executives who said they felt the same about the market as they did last year. Additionally, while 23% of the respondents say they believe that a double-dip recession is likely, 20% expect to see improvement in the economy in the coming year.
“While many PE executives think the economy will stay relatively stable in the near term, some may be concerned about fundraising amidst strong competition from other funds, along with increasingly demanding investors,” said Moyers. “Uncertainty, however, creates opportunity, so this market can lead to attractive investment scenarios for PE firms that have a track record in specific industries or markets.”
(CM)