Friday Letter: Perspectives 2014: What’s keeping you up at night?

Amid the (relative tranquillity) of August, we want limited partners to tell us what they’re worried about as we head towards 2015

August is a time when private equity tends to stop and to catch its breath – to reflect on the year to date, and to recharge the batteries for the hectic end-of-year period.

Here in London, the summer period seems to have been a particularly quiet one this year. And actually, deal data from Mergermarket suggests this perception has some basis in reality: last year, there were 267 European buyouts signed between the beginning of June and the end of August, whereas as of the start of this week, the running total since the start of June was 179, with just a week or so to go (though admittedly the total value of these deals, at €20.9 billion, is well ahead of the €18.8 billion total for the three-month period last year).

You couldn’t blame the industry for taking a bit of a breather over the summer. Activity levels have been robust in a year that has been pretty good to private equity thus far: the fundraising market is hot again, distributions are at record levels, debt is cheap and widely available, and there are no buyout guys running for the Oval Office. It’s probably a while since everyone went into this unofficial summer recess in such a (relatively) positive mood.

On the other hand, that doesn’t mean that all is rosy in the private equity garden – and the relative calm of August provides an excellent opportunity for forward-thinking LPs to assess their priorities and concerns as we head towards 2015. That’s why this week we’ve launched our annual Perspectives survey, which is designed to identify the issues that are currently top of mind for the world’s most sophisticated private equity investors.

Clearly the answer to this question is a complicated one, because LPs have so many risk factors to consider. We’ve tried to reflect that by splitting our survey into four sections. The first asks you to identify your most significant macro risks, from the slowdown in China to the leveraged lending boom. The second looks at portfolio management issues, from investment extension requests to tail-end funds. The third concerns fees and terms, from headline fees to waterfall arrangements. And the fourth category relates to the factors behind GP selection, from operational expertise to team stability.

We want to know which of these issues are most important to you as an institution – so we can go and ask fund managers and service providers what they’re doing to mitigate your concerns. Click HERE to tell us more.