Annette Wilson: Debt-driven GPs to flounder

London-based Palamon Capital's investor relations chief expects global financial turmoil to create a pressure-filled situation for LPs with off-kilter portfolios. Investors will become more conservative, likely to avoid fund managers dependent on leverage, she predicts.

How will the global financial crisis affect private equity fundraising over the next 12 months?

Annette Wilson, investor relations director of London-based Palamon Capital Partners, said:

“Following developments in recent weeks, the fundraising environment will become increasingly challenging for GPs in the months to come as LPs suffer from a lack of liquidity as exits evaporate, are hamstrung by pressure on private equity allocations due to public market declines, and are increasingly under pressure with limited resources.

Annette Wilson

LPs will have a flight to quality, becoming more selective and conservative in their fund selection as they consider the balance and risk profiles of their portfolio. They will be attracted to GPs capable of completing deals with minimal or no leverage and which are able to ride through the market shocks that are currently being experienced.  

As a GP, one of the keys to successful fundraising will be to focus on those LPs with whom you have established a long-term relationship and which take a long-term view on private equity as an asset class.”

Wilson recently shared her perspective as part of the upcoming Fundraising Compendium in sister magazine Private Equity International.