FUNDRAISING SPECIAL

“Fundraising is busier than ever at the moment as investors review general partners on a global basis and programmes are growing in size and number. We note the number of investors keeps increasing, with new regions and investor types coming to market and the asset class being more acceptable and institutionalised. The established investors have full programmes with core relationships in place and are putting more and more capital to work with them, with billion dollar commitments being more common. Also quite impressive is the breadth of the targeting done by investors as they source performance, delving into emerging markets, country funds, US mid-market and smaller cap funds. Investors are more cautious on mega-funds and there are discussions taking place on the size of the new larger funds. Lastly, European venture is coming back into favour after seven years in hibernation from a fundraising perspective as performance is good.”

Mounir Guen, chief executive, MVision, London

“Despite difficult debt markets, the outlook is positive. Big buyout returns have been excellent and, although enhanced by debt, the fundamentals (EBITDA, strategy and efficiency improvements), remain strong. The big questions are deal prices, partly affected by debt pricing, and the appropriate size of funds. The mid-market, with lower leverage, seems less affected. As long as the current crisis doesn't spill over, mid-market returns should hold up. Investor interest is increasing in venture, especially for technology deals. Several EVCA members are targeting Europe instead of their traditional 100 percent US allocation, indicating potential for competitive and sustainable returns.”

Javier Echarri, secretary general, European Private Equity and Venture Capital Association, Brussels

“We are likely to see a slowdown in investment pace from larger firms, leading to longer investment periods than of late and managers postponing fund raisings. Also there will most likely be a slowdown in exits and recaps which will impact distributions and could potentially reduce institutions' capacity and appetite for backing repeat funds. In general we expect a move away from larger buyout funds to midmarket for so long as mid-market is unaffected by the credit crisis. Asia and other emerging market private equity funds appear to have been resilient however they also may suffer if the Western markets moved into recession. Turnaround and special situation or niche funds will be popular as will more operationally focused funds while funds that have relied on financial engineering and leverage may be less popular. Mezzanine funds have already seen a lift in popularity.”

Andrew Bentley, partner, Campbell Lutyens, London

“One thing will dominate fundraising discussions with potential investors (it already is to some extent): How is your strategy affected by the credit crunch? Firms in the mid-market will probably be able to respond reasonably positively. It seems that small syndicates of traditional lenders who tend to hold rather than sell their loan positions can still be put together to finance deals of up to €250 million if the sponsor has credibility and the credit is good. Raising a mega-fund will be more challenging as it's not obvious how they will be able to do deals until the current overhang of unsyndicated loans clears through. And if they can't do deals, why would an investor make a commitment that isn't going to be drawn other than for management fees?”

Ian Simpson, managing director, Helix Associates, London

“Long term it is very difficult to predict how the private equity fundraising market will develop, although it is almost certain that appetite for investors to allocate funds to the asset class will continue to increase. Recently there has been a sense that LPs are looking to further diversify their portfolios by moving away from the mega-fund space, towards the mid-market. Over the last couple of years it was clear that a large number of investors were reducing their number of GP relationships and investing larger sums of money into fewer and bigger funds. However, in light of the situation in the credit market, and the fact that mid-market deals are still being done, while executing deals in the mega-fund space seems a lot tougher, the focus of LPs is likely to shift towards the mid-market as they rebalance their portfolios.”

Mads Ryum Larsen, partner and head of investor relations, Industri Kapital, London

“A key theme over the next year will be whether to continue to participate in domestic fundraising as fund sizes rise inexorably. For Australian investors looking at their global private equity exposure the key issue will be persuading LPs not to fall into the trap of “market timing”. The inevitable slowdown in GP investment rates as a consequence of debt market turbulence is tempting some LPs to stand out of the market.”

Les Fallick, founder and managing director, Principle Advisory Services, Sydney

“I think the large end of the buyout market is effectively closed because it's difficult to get debt finance. That must have an impact on the pace of future fundraising. Counter to that, much of the capital accumulated by the megafunds recently has already been invested. Perhaps a more pertinent question is what the impact will be on the size of funds that are currently in the market. The mid-market, meanwhile, is likely to be an attractive space to LPs as it has proved to be far less volatile than the large end of the market. However, the key for LPs in any part of the market is being able to access the best funds. Our last two funds have not been open to new investors.”

Brian Blakemore, investor relations director, Barclays Private Equity, London