Benchmark this!
First up, some exciting news for Private Equity International subscribers: our product team has been working on adding a function that allows users to benchmark our database of over 38,000 PE funds and compare performance. We want to ensure this function ticks all the boxes and is as useful as possible for users before launching it, and to do this, we’d love to get feedback from you. Please get in touch if you’d like to provide input into this future benchmarking tool and have a call with the product team.

European zombies on the horizon
Side Letter caught up with a leading placement agent for coffee this week and the picture isn’t looking rosy for European fundraising. Europe-focused funds will either have to revise down their existing targets, or seek less than they otherwise would have liked to when launching their next vintages, according to the placement agent. “It’s hard these days to attract interest from US LPs for European funds,” the placement agent said. “US macro is doing pretty well” and investors are worried about the European energy crisis, Russia’s invasion of Ukraine, and inflation in the region, the person added. In worst case scenarios, some European GPs won’t get funded at all, the person said. “If they don’t have the support of their [existing LPs] and they’re not able to raise any or much new capital out of Europe, then I suspect we probably will read about a few failures. And they may do it quietly – quietly wind down and not raise a subsequent fund.” A sobering thought.

ESG on the back burner
Investment bank Raymond James published its 2023 Private Markets Investor Survey this month and one key takeaway appears to be that challenging macroeconomic conditions are pushing LPs to reduce their focus on ESG. The survey canvassed more than 500 LPs from North America, Europe, Asia and the Middle East and found that investors are shifting their focus towards areas where they see opportunity for strong performance above all else.

Sunaina Sinha Haldea, global head of Raymond James’ Private Capital Advisory group, said of the survey results: “LPs are exercising more caution now than at the beginning of 2022, and this trend is expected to continue because of the macroeconomic environment, characterised by rising interest rates, higher cost of capital, and [a] slowing economy. Moreover, the fall of Silicon Valley Bank, other US regional players, and Credit Suisse, risks denting investor confidence in an already constrained environment.”

LPs are focusing more on allocating their portfolios to funds that they suspect will perform well, which is resulting in “a growing indifference towards ESG factors”, according to the survey. The number of LPs that view ESG as “not important” increased from 7 percent in the previous year’s survey to 21 percent, while the percentage of those who see it as “very important” declined from 43 percent to 19 percent. With today’s market characterised by longer fundraising cycles and limited allocations, seeking out strong performers is first and foremost on investors’ minds – increasingly, it would appear, at the potential detriment of other factors.

Essentials