Higher Number of Private Equity Execs See 'Difficulty' Complying With New Regulations, Says KPMG Survey

NEW YORK, Oct. 6, 2011 /PRNewswire/ -- More than half of the private equity (PE) 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 U.S. audit, tax and advisory firm.

The survey, conducted at the Dow Jones Private Equity Analyst Conference last week, found that 51 percent of the PE respondents thought adhering to the new regulations was difficult. Another 31 percent described the process as "mildly intrusive," and only 17 percent of executives thought it is a non-issue.

Interestingly, when the same question was asked at last year's conference, just 43 percent of those surveyed believed that meeting regulatory requirements was a time-consuming, difficult process.

"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," said Marc Moyers, National Sector Leader for KPMG's U.S. 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 PE industry, 42 percent of PE executives cited the recent Dodd-Frank regulation, while 31 percent said indecision on the debt crisis. Healthcare reform was a distant third at 14 percent of respondents.

Outlook: Stagnant on the Economy; Mixed on Fundraising

More than half (57 percent) of the PE executives polled believe the national economy will remain stagnant in the near future. Additionally, while 23 percent of the respondents say they believe that a double-dip recession is likely, 20 percent expect to see improvement in the economy in the coming year.

PE executives were also split when asked hypothetically about their fundraising optimism, with 36 percent 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 percent) said they would be more optimistic than a year ago. Close behind at 30 percent were those PE executives who said they felt the same about the market as they did last 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."

Other KPMG survey findings include:

• PE executives believe energy will be the most attractive industry to invest in next year (38 percent), followed by health care (19 percent), financial services (15 percent), social media/mobility (14 percent) and real estate (13 percent).
• Brazil was voted the most attractive region to invest in outside of the U.S. by 33 percent of respondents, followed by China (28 percent) and India (16 percent).
• Most respondents (49 percent) said they expect the IPO window to remain closed until early next year, while 35 percent expect the IPO market to pick-up next spring or summer. Only 16 percent expect the IPO market to open up again this fall.

The survey was conducted at the Dow Jones Private Equity Analyst Conference in New York on September 27 and 28, with a range of 151 to 95 responses per question.

About KPMG's Private Equity Practice

KPMG's Private Equity group is a cross-functional, cross-geographic, and cross-sector team focused on serving private equity firms and their portfolio companies. KPMG's Private Equity group works with clients throughout the entire private equity lifecycle, from fundraising to realizing value. KPMG's Private Equity group is comprised of more than 600 experienced professionals, including 60 partners solely dedicated to Private Equity. Our team has a deep understanding of the private equity industry, including the distinct challenges and opportunities facing the industry.

About KPMG LLP

KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com), is the U.S. member firm of KPMG International Cooperative ("KPMG International.") KPMG International's member firms have 138,000 professionals, including more than 7,900 partners, in 150 countries.

SOURCE KPMG LLP