SEC Examining Carlyle, Apollo Fee Practices

The US Securities and Exchange Commission (SEC) is conducting informal investigations into the fee practices of Carlyle Group and Apollo Global Management, according to regulatory filings by the firms.

Carlyle said the SEC had requested “additional information about our historical monitoring fee acceleration practices” in its February 10-K filing.

“We are cooperating fully with the SEC’s informal request,” the firm continued.

Apollo revealed in its November 10-Q filing that it had likewise been asked for additional information on “disclosure to limited partners of the acceleration of certain special fees.”

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“The company is fully and voluntarily cooperating with the informal request,” Apollo said.

Spokespeople for both companies would not provide any additional comment.

Private equity firms Blackstone and KKR paid a combined $69 million in SEC settlements last year for charges related to improper fee disclosures.

Blackstone’s charges came a year after the SEC “informally requested additional information about [its] historical monitoring fee termination practices” in October 2014, the firm said in its most recent 10-Q filing.

SEC Chair Mary Jo White said in October that private equity fee and expense practices continue to be one of the regulator’s top concerns.

“Investors, regardless of their sophistication level, must have, and deserve to have, the information necessary about their adviser and funds to make an informed investment decision,” she said.

CIO216-Article-Image-Nick-Reeves_ALT It pays to delegate.

Take my latest house move. (Yes, latest: that’s London property prices for you. A van-hire firm’s dream.)

I could have hired the van, driven, loaded, unloaded, unpacked, and arranged everything myself. Masculine pride and an intense dislike of spending money told me it was doable. A quick look in the mirror reminded me I’m not a bodybuilder.

Solution: Rope in father and younger sister. Two more sets of hands at no extra cost.

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But delegating also costs.

In my case, having younger sister unpack the kitchen meant several days of working out where everything ended up. Of course the table mats were in the fourth drawer to the right, under two empty drawers. Older siblings obviously know nothing of how these things should work.

For asset owners, choosing to delegate is a much less trivial decision. Handing mandates to asset managers is a part of everyday life for a CIO—and it involves giving up a degree of control. Even more so when selecting a fiduciary manager or outsourced-CIO. Why spend that extra money?

I’d imagine CIOs would hate the idea of delegating both asset selection and allocation to a third party. The overwhelming trend among the largest funds in the world has been to insource, to staff up, and to take complete control.

And yet… Multi-asset funds are on the rise. Some of the biggest managers in the world are pushing forms of multi-asset. Add in fiduciary management and risk parity, and the sector is massive.

In this edition we look at control. Our cover story asks if multi-asset providers can persuade the control freaks out there that these products can play a meaningful role in multi-billion euro portfolios. Or whether using it is the CIO’s equivalent of ‘phoning it in.’

Mark Thompson, CIO of HSBC’s UK pension, retains control in a different way, turning his £23 billion ($33 billion) defined benefit portfolio into effectively an in-house annuity provider. Sorry, insurers, but you ain’t getting any.

Finally, our columnist Gina Miller wants the industry to take control of the gender gap issue once and for all.

Whether you’re a control freak or a delegator, this issue should give you an idea or two to help (or challenge) this mindset. Just make sure you know where the table mats are.