Skip to content

Compliance Building

Doug Cornelius on compliance for private equity real estate

Menu
  • Home
  • About
    • About
    • About Doug
    • About This Website
    • Why I Blog
    • Speaking Engagements
    • Contact
    • Publications
  • Archives
    • Topic Archive
    • Book Reviews
    • Most Popular
  • Subscribe
  • Disclaimers
    • Disclaimers
    • Policies and Procedures
    • Use of Site Content
    • Comments
    • FTC Disclosure
Menu

Headline Risk

Posted on May 1, 2017 by Doug Cornelius
Print Friendly, PDF & Email

On Thursday, The Wall Street Journal published an article on conflicts between the top executives of some private equity firms and their personal investments: “Fund Kings Open Family Offices.”

The article focused on two aspects of the executives’ wealth management: (1) distractions from activities outside the funds and (2) conflicting investments with the funds.

On the distraction issue, the article provided conflicting views from investors. One view is that executives should have all of their own money in the firms’ funds. The other view is the more pragmatic approach that diversification makes sense as long as the outside investments are not a distraction. Primarily, the concern is that the fund is the primary beneficiary of investment ideas and the executives’ time.

The second issue comes from those “distractions.” Personal investments may intersect with the fund investments. The article identifies instances where there was an overlap and a potential conflict. The article mentions the use of “family offices” by some fund executives. Some of these family offices also invest in private equity and other opportunities that may be opportunities that also interest the fund.

I think the article is a compilation of “headline risk.” There are no wrongdoings outlined in the article. There is just the appearance of conflicts.

The private equity firms require the investments of executives to be run through compliance and a conflicts review process. I have little doubt that big private equity firms that Blackstone, Apollo and TPG would have thoughtful review processes to make sure that the potential conflicts are resolved in a way that protects the funds.

The conflict review process is internal and the transaction is private so there is little disclosure made available to the public or to reporters that may be interested. That leaves the firms open to this type of headline risk.

The more high profile the outside investments, the greater media scrutiny they attract and the greater the headline risk.

One of the Fortress Investment Group executives bought a professional sports team, one of the most high profile investments you can make.

Share this:

  • Click to print (Opens in new window) Print
  • Click to share on Facebook (Opens in new window) Facebook
  • Click to share on LinkedIn (Opens in new window) LinkedIn
  • Click to share on X (Opens in new window) X
  • Click to email a link to a friend (Opens in new window) Email

Leave a ReplyCancel reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Search for Stuff

Recent Stories

  • Compliance Bricks and Mortar for January 9
  • “Small”: I Don’t Think You Know What That Means
  • CFTC is Saying Goodbye to Private Funds
  • New York’s LLC Transparency Act Will Remain Limited
  • SEC and CFTC With Only Republicans
  • Compliance Books from 2025
  • Happy New Year
  • The One That Can Drive You and Give You Investment Advice
  • The One with the Foreclosure and OFAC Sanctions
  • Can Precious Gem Buying Being Securities Fraud?

Fight Cancer

Please support my Pan-Mass Challenge
Make a donation to fight cancer. donate.pmc.org/DC0176
pan-mass challenge badge

I am a lawyer, but I am not your lawyer. Since I’m a lawyer, this website may be considered attorney advertising under the ethical rules of certain jurisdictions. Please read my disclaimers page before taking any action. And then, don't take any action based on what I wrote.

Creative Commons logo with the text 'Some Rights Reserved' and three symbols representing attribution, non-commercial use, and share alike.

Compliance Building - by Doug Cornelius is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License.