Front-running in Private Equity – Conflicts of Interests Among Fund Investors

Investors in private equity funds customarily engage in multiple investment activities and anyone private equity fund investment often represents only a very small slice of an investor’s portfolio. Investors are increasingly utilizing their private equity fund investments as a window into specific markets or sectors and a source of deal pipeline to build their larger investment portfolios. This is especially true in emerging markets where having “feet on the ground” is necessary and access to a private equity fund manager and its network can provide the necessary local market intelligence. With private equity fund investment increasingly serving as a deal sourcing mechanism, fund investors are finding themselves in conflict and competition with one another (and even with the funds in which they invest) with respect to deal pipeline access and market intelligence. This article explores how these investor conflicts of interest are playing out in the private equity fund context.