When Reporting Is the Governance

Private markets have a transparency problem that most participants acknowledge but few can precisely locate. It is not that information is unavailable. It is that the information produced does not reliably support the decisions limited partners need to make. The gap between data delivered and insight derived is where governance actually breaks down.

NAV facilities illustrate the problem clearly. At the DealCatalyst Future of Fund Finance conversation in January 2025, practitioners gathered to examine how these instruments fit within the broader private credit landscape. The structural question underneath that conversation is not whether NAV facilities are useful — they often are — but whether LPs receive reporting that lets them assess exposure, seniority, and fund-level leverage in real time. Without that, alignment is asserted rather than demonstrated.

Alignment is not a sentiment. It is a structural property of information flow.

The three pillars that anchor ILPA's program — alignment, transparency, and good governance — are easier to name than to operationalize. What makes them operational is reporting quality. When reporting is weak, general partners can describe their decision-making in favorable terms and LPs have limited means to verify the characterization. When reporting is strong, the same description can be tested against evidence. The difference is not a matter of intent; it is a matter of infrastructure.

Regulatory development elsewhere in credit markets suggests this infrastructure question is becoming unavoidable. Mandatory data collection requirements in small business lending, for instance, are designed precisely to surface information that market participants previously disclosed selectively or not at all. The regulatory logic is consistent: when reporting standards are voluntary and uneven, the data that emerges reflects what institutions are comfortable sharing rather than what counterparties need to know. Extending that logic to private markets reporting, standardized disclosure frameworks may help reduce information asymmetries that persist even among sophisticated LP investors — though whether any framework achieves that outcome depends substantially on implementation quality.

The Federal Reserve's periodic surveys of senior loan officers track credit supply and demand through self-reported bank behavior. What those surveys consistently reveal is that lending standards tighten or loosen in ways that correlate with perceived risk, but the perception itself is shaped by available information. In private markets, where secondary pricing is thin and fund-level data arrives quarterly at best, the information environment is structurally weaker. LPs are, in effect, making credit and allocation judgments under conditions that bank loan officers would find operationally unacceptable.

This is where the commons framing matters. Nobel laureate Elinor Ostrom demonstrated that shared resources can be governed sustainably when participants establish clear rules, monitor compliance collectively, and resolve disputes through legitimate local institutions rather than deferring to external regulators. Private markets reporting is a collective resource problem in exactly this sense. Every LP benefits when GPs adopt rigorous standards, but any individual GP has an incentive to minimize disclosure burden. The result is a commons that degrades toward minimum viable transparency unless the institutional infrastructure — bodies like ILPA — can enforce coordinated norms.

Coordinated norms, however, require legitimacy. They require that LPs make their voices heard in shaping what good reporting looks like before standards are settled, not after.

The insight in ILPA's October 2024 call for input on private markets reporting is not procedural. It reflects a recognition that governance without data is performance, and that data without governance is noise. The two have to be built together, and the window for doing that before NAV facilities and other novel structures become fully normalized in LP portfolios is narrowing. What remains open is whether sufficient LP participation in standard-setting will materialize before the architecture of disclosure is effectively locked in by practice rather than design.