Code of Conduct

Act in fairness

Fairness means “playing by the rules,” whether those are legislative or otherwise, and should be based on facts and circumstances. Fairness also requires considering how decisions and actions affect others, both individuals and groups, and how these actions are perceived. 

Business rules can differ between countries, regions, societies, legal systems, and types of transactions. It’s important that members understand the specific rules applicable to their own jurisdiction, business, or situation, as their actions will often be judged according to these formal or informal rules. “Fairness” can have both regulatory and commercial implications, especially in relationships with investors. While the GP (General Partner) must manage the fund in line with the strategy and objectives established in the fund documentation, there are times when the GP should assess the individual treatment of investors to ensure fairness. 

Specifically, the GP should carefully consider whether any investor is receiving preferential treatment and, if so, whether this has been disclosed to other investors. Fairness does not always require identical treatment for everyone; in such cases, transparency is vital. Legal and regulatory standards may also stipulate specific disclosure requirements. Consulting with the LPAC (Limited Partner Advisory Committee) or all LPs, where appropriate, helps ensure fair treatment and awareness of relevant concerns.

An LP should consider the interests of the fund as a whole and how their actions may impact the fund, other LPs, or the GP. LPs should engage with the GP and other LPs promptly when serious situations arise, especially if they may lead to an LP vote under the fund documents. Providing adequate information ensures actions are judged objectively for fairness. A GP must consider the information needs of LPs, communicating timely, clear, fair, and accurate information within the limits of confidentiality. Strong investor relations for a GP rely on clear disclosure and timely communication of relevant, material information. The GP should also maintain open communication with portfolio company management. Likewise, LPs should communicate clearly and promptly with the GP.

Act with integrity

Integrity is the fundamental foundation of trust in business relationships. Trust develops over repeated interactions characterized by clarity, reliability, honesty, and a high standard of personal and professional behavior. Integrity means gaining competitive advantage and commercial success through superior skills, both individually and collectively—not through inappropriate pressure, manipulation, coercion, or deception. The GP will act with integrity toward its LPs, portfolio companies, and other stakeholders, and will strive to ensure portfolio companies conduct business ethically. To uphold these standards, firms should implement and maintain processes to detect and address unethical or unlawful conduct.

The GP also expects the same integrity from its LPs in all their interactions. Acting with integrity means not seeking to evade or avoid responsibility for mistakes.

Disclosure of conflicts of interests

Conflicts of interest can occur when a person who has a duty to another also has a personal or professional interest that might interfere with the exercise of independent judgment. They inevitably arise within business. In private equity, conflicts can arise in the following cases:

• between the GP and the fund and its LPs;
• between different funds;
• between different LPs in the fund;
• between LPs of different funds managed by the GP; and
• between the fund and other investors in the respective portfolio companies.

Procedures to ensure the management and disclosure of conflicts should be in place at all firms, and conflicts of interest should be diligently identified and disclosed to all parties concerned.

A GP should seek to manage conflicts of interest fairly. Where these conflicts of interest affect LPs, the GP should always consult with the LP Advisory Committee (“LPAC”) as part of this process. To facilitate conflict management, LPs should ensure they declare their conflicts of interest in all situations.

Do not harm the industry

Responsible business conduct is essential to sustaining the private equity industry.

Success in commercial enterprise depends on achieving a competitive advantage. While the pursuit of competitive advantage is not inherently harmful to the industry, industry participants must conduct business responsibly and avoid practices that could foreseeably damage the industry’s public image or the interests of its stakeholders. All industry members should promote best practices and maintain high standards of personal and professional behavior to support the broader goals of long-term, sustainable investment, economic growth, and value creation.

Private equity plays a vital role in today’s economy. We expect our clients, and the funds and portfolio companies they manage, to comply with all applicable laws and regulations in the jurisdictions in which they operate. Private equity is dedicated to creating lasting value in the companies it owns. Therefore, engaging in practices that cause reputational damage by violating laws and regulations for gain or gratification is considered detrimental to the industry as a whole.

Keep your promises

Ethical business behavior implies keeping promises, regardless of whether there is a legal obligation to do so. Promises are made in the light of circumstances that are known at the time that the promise is made. Within the industry, commitments are often made subject to conditions such as the provision of additional information, conducting due diligence, the outcome of uncertain external events, and other factors. This means that clarity about what is actually committed to and what remains subject to further investigation is crucial.

An ethical individual or business makes promises only when they reasonably believe they can be fulfilled. Promises are of equal importance regardless of to whom they are made.

Maintain confidentiality

Protecting confidentiality in investment management is crucial. In the ordinary course of business, individuals and firms obtain a range of financial and non-financial information from other market participants and through their roles in managing investments. Some of this information is publicly available; however, some may be commercially sensitive, and its dissemination could cause damage or financial loss to the owner.

The GP will treat portfolio company or LP information as confidential if they are made aware, or should reasonably expect, that it is confidential or commercially sensitive. Any use of such information should be restricted to what has been agreed with the owner or as mandated by law or regulation.

LPs should also comply with contractual and regulatory requirements to maintain confidentiality, for example, when receiving confidential information during due diligence on a fund (regardless of their decision to commit) or when accessing information considered confidential as an LP in the fund.

To safeguard the commercial interests of the disclosing parties, reasonable steps should be taken to protect information from inappropriate disclosure, and due care should be exercised in following any agreed procedures.