The UK private equity industry is headed towards a significant fundraising challenge, according to recent research.
Investec’s Private Equity Barometer, a yearly survey conducted by London-headquartered Investec bank, asked 117 UK-based senior private equity professionals about their firm’s fundraising plans for the coming years. Nearly 90 percent of respondents expected to be raising funds within the next 24 months, with 83 percent confident their next vehicle would be as large, or larger, than their previous one.
These figures came as confidence is returning to private equity practitioners, the barometer’s other findings suggested. More than 80 percent of GPs polled expected to earn carried interest from investments in their existing funds, whilst nine out of 10 professionals deemed themselves satisfied with their career in the buyout industry – 38 percent more than a year ago.
Confidence is returning
“The findings present a much brighter picture than last year’s research. Significant fund raising activity is anticipated with an increasing number of GPs expecting to raise more money in their new funds than previously,” said Simon Hamilton, general partner at Investec.
But the study also revealed that investors increasingly expect GPs to put “more skin in the game”: nearly half of managers polled said 2 percent of the capital raised for their own vehicle would have to be made up of their own money – with one in 10 expecting this commitment to go over 7 percent.
“Creating alignment of interests between investors and managers continues to be an important topic. Our research backs up the growing trend we have seen over the past 12 months where GPs are looking to create ways to commit more money to their own funds,” Hamilton said.
Only 8 percent of GPs expected their fund to be smaller than their previous one, with only 3 percent saying that they would not raise another fund.