Heard on the streets of Berlin

A preference for blue-chip GPs, limits on LP resources and the diminishing appeal of UK funds were on the minds of private equity participants who gathered in the German capital last week.

Hundreds of private equity executives descended on f the German capital last week for an industry conference, so Private Equity International put boots on the ground to discover this year’s key trends.

“Everyone says it’s easy to raise money now but it’s not unless you’re a brand name”

Private equity fundraising soared to its highest level since 2008 last year, according to PEI data. With so much capital, the fundraising process appears easier than ever.

However, one US-based fund of funds manager told PEI that this is not the case unless you are a blue-chip firm with a global reputation. Some LPs are reducing the number of GP relationships they manage and replacing these with larger and fewer commitments. This tends to favour firms with the capacity to accept larger commitments across a number of asset classes.

There is a split emerging in time-in-market: funds larger than $5 billion took on average just five months to reach a final close in 2017, down from 12 months the previous year, according to PEI data. This compares with 13 months for funds smaller than $1 billion last year, up from 11 months in 2016.

“LPs are completely consumed by re-ups because GPs are pre-marketing at 50 percent deployed

One European placement agent told PEI that some GPs are now thinking about their next funds earlier than in previous years, with pre-marketing starting when their existing vehicle is just halfway deployed.

The remarks echo Hamilton Lane’s December comments that it had received a record number of private placement memoranda in 2017 – around 800 – and that this, combined with faster fundraising processes, has made it difficult for some investors to make considered decisions.

“It’s putting a lot of pressure on LPs to be able to make those timely decisions to commit to the hardest-to-access managers,” Brian Gildea, managing director in the firm’s co-investment team, told PEI at the time.

“Everyone is positive except for when it comes to the UK”

One UK-based fund manager said LPs were increasingly sceptical of committing to vehicles in the UK due to uncertainty over the consequences of its impending departure from the EU. In January UK mid-market investor Lyceum Capital decided to stop fundraising for its fourth fund and switch to a deal-by-deal strategy. The firm cited a number of international LPs taking a more cautious approach to the UK in the aftermath of the Brexit vote, among other factors.

Such fears prompted the European Investment Fund to deny the existence of a moratorium on investments into UK funds in August. Instead “due diligence on them now needs to be more thorough, and take into account a wider range of factors”, a European Investment Bank spokesman said.