Data Room: Liquidity matters

Private equity has traditionally required “patient” capital from investors in order to enable GPs to find, manage and realise illiquid assets. For Giles Travers, director of Alternative Investment Funds at financial advisory firm SEI in London, a survey the firm undertook in November 2014 highlighted a number of shifts in attitudes towards private equity.

SEI surveyed 212 global private equity GPs, LPs and consultants on a range of subjects including the role of retail private equity funds in what has until quite recently been a purely institutional business. One key trend highlighted was greater demand from many LPs to increase their exposure to private equity. For Travers, that shift is reflected in the number of GPs looking to find different ways to cater for both old and new investors.

Travers told PEI: “GPs have looked at innovative ways to provide their investors with liquidity and flexibility. Liquidity is one of the key developments in what many private equity firms see as the Holy Grail: permanent capital.”

A rise in the number of firms customising their investor reporting as a way of monitoring liquidity pressure has also been a noticeable trend, according to SEI.

Head of Global Solutions at SEI IMS Joe Henkel told PEI: “Transparency has also been an integral part of managing liquidity pressures. Private equity firms have begun to invest in customised investor reporting, investor dashboards and data aggregation to ensure LPs can monitor, benchmark and justify illiquid allocations. GPs can leverage the new institutional technology available in private equity to support their investor relations strategy and regulatory requirements.”

The 212 respondents were asked their attitude towards liquidity in the private equity sector and given the three options listed below:

Which best describes your view of liquidity in the private equity market?

Answer options:
1. Liquidity needs are being met by the secondaries market and other venues
2. Investors who find PE too illiquid should allocate to other asset classes
3. The PE market is more liquid than it used to be and will continue to become more so