We resume our discussion of the private equity liquidity crunch and its impact on fundraising, this time from the LP’s perspective. The supply/demand imbalance in the fundraising environment has shifted to favor LPs. This gives them greater GP access, longer diligence windows, and more negotiating power with LPA terms.
But many LPs, their investment programs tied to distributions, are hamstrung: no cash in means no cash out. For those with ample dry powder and who deploy from independent pools of capital, now can be a great time to invest. That said, there are pitfalls to avoid.
Lower distributions dominate headlines, but less publicized is a slowdown in capital deployed. GP grapple with fewer exits, which means fewer businesses bought. Compounding the issue is the number of GPs raising capital and the amount of dry power chasing assets. For LPs looking to deploy capital, choosing managers who can’t find enough opportunities or settle for lower quality assets that introduce unnecessary risk into the portfolio is problematic...
“The prospect of lower interest rates and a more pro-business approach from the incoming administration has fueled greater optimism.” – Chris Williamson, economist, S&P Global Market Intelligence.
Featuring Charts
Chart of the Week: Bigger Brothers
Since 2020 the share of GPs raising larger funds has been growing. Source: PitchBook(Past performance is no guarantee of future results.)
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Chart of the Week: No Money-Back Guarantee
The absence of realizations has hampered distributions to LPs. Source: Burgiss/MSCI(Past performance is no guarantee of future results.)
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Chart of the Week: Secondaries on the March
The growth of equity secondaries is fueled by both LP and GP liquidity needs. Source: Jefferies(Past performance is no guarantee of future results.)
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Chart of the Week: On Holds
In the absence of M&A activity, PE portfolio companies are held for extended periods. Source: PitchBook(Past performance is no guarantee of future results.)
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Chart of the Week: Who’s The Driest?
Despite claims of a “too crowded” private debt market, PE dry powder is four times greater. Source: Preqin(Past performance is no guarantee of future results.)
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Chart of the Week: A World Away
Fund managers are looking increasingly to global issues for biggest risks. Source: The Daily Shot, BofA Global Research(Past performance is no guarantee of future results.)
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Private Debt Intelligence – 12/2/2024
Management fee rates vary by private debt strategy Read more in Preqin’s ‘Strategy in Focus: Challenges to Income Generation’ Interest rate cuts across major economies have slowed the growth of private debt, with GPs combatting fundraising headwinds by making concessions on fees and terms to secure capital…. Subscribe to Read MoreAlready a member? Log in
Middle Market & Private Credit – 12/2/2024
Business Development Companies Outlook 2025 Click here to download report. Join Fitch for the upcoming Outlook panel: Private Corporate Credit, What to Expect in 2025. What to Watch The impact of heightened competition on middle-market deal terms and structures…. Subscribe to Read MoreAlready a member? Log in here...
Leveraged Loan Insight & Analysis – 12/2/2024
Healthcare, general manufacturing and services sectors see most loans added to non-accrual status in 3Q24 A total of US$980m of BDC loans were added to non-accrual status in 3Q24, down from US$2.1bn in the prior quarter…. Subscribe to Read MoreAlready a member? Log in here...
PDI Picks – 12/2/2024
Fundraising gathers momentum By the end of the third quarter of this year, capital raising was proving to be somewhat less challenging for private credit GPs. After a tough first quarter, private debt fundraising picked up the pace through the rest of 2024 to end Q3 just slightly behind the equivalent period in 2023. Q3…
Private Debt Intelligence – 11/18/2024
Private equity deal value rises above five-year average Read more in Preqin’s ‘Deal Flow Monitor: Q3 2024’ Private equity deal value in North America increased to $98.7bn in Q3 2023, exceeding the five-year average of $84bn, and accounting for 40.8% of all private capital deals in the region…. Subscribe to Read MoreAlready a member? Log
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Beginning in July 2022 The Lead Left published a series of articles on credit market. This report consolidates those articles.
Cov-lite trends Inflation & rising interest rates – LIBOR to SOFR transition Mega-tranche uni trend ESG takes center stage Login to view interactive report and download PDF version. … Subscribe to Read MoreAlready a member? Log in here Related posts: 2H 2021 Midyear Outlook Report State of the Capital Markets – Fourth Quarter 2016 Review and
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