Mega-fundraises obscure growing LP appetite for smaller buyouts
More capital is going into the hands of the biggest funds, and yet according to research shared with PEI, LPs are turning their attention to the lower end of the market.
Now that a number of the large-cap private equity funds have closed or are getting to the tail-end of their fundraises, the lower and mid-markets could be recipients of more cheques from LPs.
This week, Private Equity International reported that the top 15 funds to hold a final close between Q1 and Q3 collected more than $200 billion in total for the first time in at least the last six years, according to our preliminary data.
With these managers and others raking in lofty amounts, is the outlook bleak for smaller managers raising capital in the lower to mid-markets? Analysis carried out by Cambridge Associates on its private investments database last year shows that...
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Co-Founder @ Gather Capital | Private Investment Office Curating Top Tier Private Equity Funds
1 年PEI is highlighting an important theme we are seeing at Gather Capital. Investing in brand name megafunds has much less upside as returns fall towards the private equity median - see my post on this here: https://lnkd.in/dcZmk4ev We've diligenced most of the top small and midcap PE GPs that have raised and are currently raising this year and next year. The challenge for LPs that want better returns via small and midcap PE GPs is to determine which GPs are best positioned to deliver persistent, top quartile returns as capital inflows increase. As LP money flows towards small and midcap PE GPs, the danger is that some GPs scale fund size (and thus deal size or # of deals) too quickly at the expense of performance. See my post on this here: https://lnkd.in/detAHZkS The key for GPs is to avoid the trajectory the public megafunds have taken chasing AUM / management fees and stock price growth at the expense of returns. The giant sovereign wealth and pension fund LPs prop up the megafunds since these LPs need to put billions of dollars to work at a time. But smaller LPs and individual investors don't have this "capital deployment" problem. They should pursue top quartile performance above all else. www.GatherAlts.com