Necessary reports should made available to investors in a timely fashion. For quarterly and annual reports, be ready with quarterly financial statements, regular portfolio reviews, and valuation reports.
The annual report, perhaps the most important, comprises:
In addition to formal and regular reporting to investors, establish strong relationships through regular informal communication, to keep investors close, preserve their likely involvement in future funds, and empower LPs to be ambassadors to other potential investors. Regular formal and informal communication with investors on a quarterly basis is best, but such communication can take different forms depending on the LP, including scheduled field visits to investees or informal quarterly meetings.
The relationship between the management of the investee companies and the fund manager is essential, since funds are not passive investors and can ensure effective governance through ongoing, informal interactions. More formal governance of the investee companies can include representation on the board, leading a board sub-committee, and creating appropriate covenants.
One way to monitor portfolio companies is to appoint a representative from the fund to the company’s board. In this role, a fund manager would have the ability to:
In addition, a board member can suggest the establishment of other important board committees in order to provide independent oversight of the company on key issues that are reported to the board on a regular basis. These committees may focus on ethics, company audits, remuneration, corporate governance, or hiring.