Side Letter: Dechert’s Global PE Outlook; Moonfare’s Investor Survey; LPs’ net-zero roadmap

Two fresh surveys shed light on how GPs and individual investors are thinking about private equity this year. Plus: a document published by 82 LPs just gave managers a major boost on the road to net zero. Here’s today's brief, for our valued subscribers only.

Just happened

Dechert and Moonfare: diving into PE data (Source: Getty)

It’s a busy morning for data, with law firm Dechert and fundraising platform Moonfare both publishing the results of their private markets surveys. We’ve condensed some of the key findings from both.

Dechert’s Global Private Equity Outlook
The global law firm and Mergermarket surveyed 100 senior-level executives at PE firms with more than $1 billion of AUM based in North America (45 percent), EMEA (35 percent) and APAC (20 percent).

  • EMEA and APAC managers both said LPs concentrating relationships had been the biggest challenge to fundraising this year, while North American GPs said competition for LP capital was the greatest obstacle.
  • Three-quarters of APAC managers said LPs have asked for a higher GP commitment to new funds this year, compared with two-thirds of EMEA GPs and only 58 percent of North Americans.
  • More than two-thirds (69 percent) of EMEA managers said LPs have asked for hurdle rates to be increased due to rising interest rates, versus 47 percent of North American GPs and 40 percent in APAC.
  • Nearly a third (32 percent) of GPs believe the democratisation will have a significantly negative impact on returns, while only 8 percent believe it will have no impact whatsoever.
  • More than half (51 percent) of managers have increased their use of private credit financing in their buyouts. More than one-third (38 percent) have increased their use of subscription or NAV financing this year.
  • Nearly two-thirds (63 percent) of managers plan to sell a GP stake in the next 24 months, with funding GP commitments and vertical investment the most common motivators.

Moonfare’s Investor Survey 2022 White Paper
The fundraising platform surveyed 244 Moonfare investors domiciled in Europe, the US and Asia.

  • Some 44 percent will allocate between $100,001 and $500,000 to PE over the next 12 months; 11 percent will allocate more than $1 million.
  • Nearly half (47 percent) of investors have a target PE allocation of at least 20 percent.
  • Around 37 percent say that a fifth of their portfolio or more is currently invested in private assets. Buyouts, growth capital and venture capital are most popular.
  • Buyouts and infrastructure are expected to be the best-performing strategies given current economic conditions.
  • More than 77 percent of survey respondents consider tech the most appealing sector, followed by healthcare.
  • Illiquidity and fees were cited as the top factors keeping investors from writing bigger cheques to PE.

Essentials

Giving directions on the road to net zero
The Net-Zero Asset Owner Alliance, a group of 82 asset owners that have committed to net-zero portfolios by 2050, has detailed its expectations on climate for private markets managers in a 19-page “call to action”, our colleagues at New Private Markets report (registration required). The document sets out “minimum expectations” as well as key recommendations for all private asset managers in aligning with net-zero objectives. It has also provided specific actions for each asset class, ranging from governance structure and disclosure on greenhouse gas emissions, to financing the transition.

This matters, because – as NPM‘s Toby Mitchenall noted in a commentary last week – private markets remain an emissions data blind spot in many institutional portfolios, which in turn prevents them from developing effective roadmaps to net zero within those asset classes. This latest document, which tells private markets asset managers exactly what their LPs need when it comes to both reporting and “direction of travel” on climate action, should go some way towards filling in these knowledge gaps.

Dig deeper

LP meetings. It’s Monday, so here are some LP meetings to watch out for this week.

28 November

30 November

1 December


Today’s letter was prepared by Alex Lynn.