In 2000 the SEC passed Regulation Fair Disclosure. Reg FD ended the quiet call between a CFO and a favored analyst, and a public company had to say the same thing to everyone at the same time, or say nothing at all. Everyone in the industry called it a compliance cost. Boards braced for lower valuations, IR budgets went up, and lawyers billed a lot of hours writing scripts for earnings calls.
By 2005 the verdict was in. The companies that leaned into disclosure got broader analyst coverage, tighter spreads, and cheaper capital, and the ones that did the minimum got repriced against them. The compliance cost had turned into a dividend.
Private capital is about to run the same tape.
What one LP question cost
Last month an operating partner told me it took three weeks and four analysts to answer one question from one LP. The question wasn't exotic. The LP wanted to know the fund's true post-dilution ownership across 60 positions.
The data existed. It was sitting in a few thousand pages of SPAs, side letters, warrants, SAFEs, converted notes, and cap tables that had been redrawn twice since the last quarter close, and four people spent three weeks reading, with a lot of that time going to working out which version of each document was the current one.
The quarter close to LP letter cycle runs 45 to 90 days, and this fund needed three weeks to answer a question it should be able to answer in three minutes. Every GP I talk to knows this pattern, and plenty of them still describe it as a headcount problem or a systems problem they'll get to next quarter. I don't think it's either of those anymore.
For a long time I'd have defended them. Producing a current, sourced picture of every position was expensive. Reading a thousand pages of primary documents cost real money, took real time, and didn't scale, so funds rationed the picture, and you got it quarterly at best, in an LP letter that was twelve weeks stale by the time it arrived, and anything off-cycle was the one-off answer that burned four analysts.
That is no longer a technology problem. AI reads the documents now. It reads the SPA, the side letter, the cap table, and the amendment to the amendment, and it ties every number back to the page and paragraph it came from. The cost of a current portfolio picture is heading toward zero, so the excuse is gone and the advantage is open.
Where the advantage shows up
The GP who can put a sourced, defensible number in front of an LP on demand wins the allocation, because the LP wants to know whether you can produce the answer their own board is going to ask them for, and they would rather find out before they commit than after. Founders are making the same comparison from the other side, and the investor who can model the next round live in the meeting, from current data with a source next to every figure, is having a different conversation than the one working from a spreadsheet the associate cleaned up overnight. In the secondary market, buyers price against marks that reflect this month instead of last close, and the discount they have been applying to funds that couldn't produce a current mark gets smaller.
Nobody is forcing any of this. No regulator has written a Reg FD for private funds. LPs have started noticing which of their managers can answer and which can't, and they're allocating accordingly.
The part of the Reg FD story I like best is what it didn't require. Public companies after 2000 didn't have to become believers in transparency. They had to file on time and say the same thing to everyone, and plenty of them did it grudgingly and got paid anyway, because the market paid for the disclosure and didn't much care how the CFO felt about it.
Private capital works the same way. You don't have to make transparency your brand. You have to be able to show the portfolio as it stands today, with a source behind every number, at a cost low enough that rationing it stops making sense, and the GPs who can do that will see LPs recommit at higher rates and fundraises get shorter. A fund that has stopped treating the picture as expensive, and staffed accordingly, answers the 60-position question in the time it takes to open the file. That is the work I do now, and at GoodStream the answer to that question is already sitting there, with the paragraph behind each number, before the LP asks it.
The operating partner's fund is not unusual. It has good analysts and a full data room, and it still spent three weeks of four people's time on a number it could have had in three minutes. The LP who asked is going to ask again next quarter, and so is every other LP in the fund.
