Investors adding value

Few private equity fundraising professionals believe that their business will ever be quieter than it is right now. New commitments to private equity funds appear to have slowed to a trickle. A recovery is not expected before 2004.

Many institutions are too busy attending to their existing investment portfolios to even contemplate doing much in terms of putting fresh capital to general partner groups. Part of what limited partners keep focused on instead is the secondary market, in the hope of discovering a suitable route to liquidity.

AIG, a major investor in the asset class, recently found the liquidity mechanism it was looking for. Its $1bn securitisation of a portfolio of US private equity fund investments, which closed in late April, was a major milestone in the evolution of the private equity secondary marketplace. It was the first time ratings agencies Moody's and Standard & Poor's awarded a triple-A credit rating to a piece of debt backed by cashflow coming out of private equity fund investments. This piece, a $250m tranche, was subsequently sold to fixed income investors who hadn't seen this kind of credit before.

The deal was a great success for AIG, advisor Capital Dynamics and Morgan Stanley, the bank placing the bond. But it was also an example for the kind of added value that engaged private equity investors can bring to the asset class.

Engaged investors are also the subject of this month's cover story. Our list of the 30 most influential investors in Europe comprises many, though not all, of the limited partners who give shape to European private equity. These individuals bring capital and ideas to the marketplace. Expect them to provider further impetus to the formation of a liquid secondaries market. Also expect them to be there when fundraising resumes in earnest.

Philip Borel

Managing Editor