Some well-respected figures in private equity have recently argued that the industry should change its name. Instead, the industry should change the way it communicates with the public.
Those who want a name change believe that the word ‘private’ sends out the wrong message and that it doesn’t truly reflect how private equity works.
I feel that the name of the asset class is now so firmly established among our stakeholders, particularly since we are now a regulated industry, that it would be extremely difficult to introduce such a change. Plus, rather than looking at the outside, we should continue to make strong efforts to explain what is behind this term.
Private equity is not really private at all. It is the companies that we invest in that are private – that is, their shares are not listed on a public stock exchange – this is where the name comes from. So from this point of view the name private equity is correct.
In Europe, we are fast-approaching the implementation date of the Alternative Investment Fund Managers Directive. Private equity is not hidden away in the shadows, it is out in the open – a regulated industry with many disclosure requirements.
But in the past the industry probably did underestimate the importance to better communicate towards a broader public. This has now changed.
We and the majority of our members make considerable efforts to reach out to their stakeholders and explain what private equity is: We bring together the supply and the demand for long-term investment capital. For a broader public, the outcome is mainly visible in the better businesses that we build.
There are hundreds of success stories in Europe. We need to tell them. The EVCA is privileged to lead these efforts.
That’s why the EVCA launched a transparency initiative two years ago. All the EVCA industry statistics are available on our website, where we also disclose information about our work with regulators and policymakers. Our Annual Report, which includes the EVCA financials, is also widely circulated.
As an industry we need to also refrain from speaking in jargon when addressing the public. That’s why we are refraining from certain words or terms like “deals” in our general communication, that we also increased considerably over the past years.
Recently, we’ve launched a new animation How private equity works. It’s part of our drive towards more discussion, more openness and more understanding of our industry.
Talking more about how private equity funds are a long-term investment that creates value is the way forward.
What’s needed is a change in our attitude towards communication rather than a change of name.