Side Letter: PEI Awards – vote now; LP Perspectives 2023; Gensler’s private fund ambitions

Don't miss your chance to vote in this year's PEI Awards. Plus: Our latest LP Perspectives survey reveals how investors are thinking about the asset class next year; and why the SEC's private funds proposals may lose some of their bite. Here’s today's brief, for our valued subscribers only.

Just happened

Remember to vote!
It’s that joyous and festive time of the year we’ve all been waiting for. Yes, the PEI Awards voting period, which this year showcases 74 categories spanning the Americas, Asia-Pacific and EMEA, as well as global, strategy and secondaries sections. To help you navigate the voting process, we’ve drawn up a shortlist for each category based on our coverage throughout the year, our conversations with the market and your submissions.

The polls close at 11:59pm PST on Friday 6 January 2023, with the results revealed in March. Good luck to all nominees, and happy voting! Do so here.

What are LPs thinking about?
In an investment environment as volatile and challenging as this one, knowing exactly what LPs are thinking about can be a useful guide. Enter: Private Equity International‘s LP Perspectives 2023, our latest annual study of the LP community and its sentiment towards the asset class. From investment plans to due diligence priorities and attitudes towards GPs’ ESG programmes, this year’s study tracks LP expectations for PE going into 2023. You can find this years’ survey in full here. Below are some key findings:

  • Only 28 percent of LPs plan to increase the amount invested in PE next year, while the share of respondents planning to invest less has tripled to 21 percent.
  • The share of LPs that are overallocated to PE has doubled to 24 percent from 12 percent in our 2019 survey.
  • The share of LPs planning to sell PE fund stakes on the secondaries market has grown to 22 percent from 15 percent.
  • More than one-quarter believe PE will underperform its benchmark over the next 12 months.
  • The proportion of LPs seeking to cut GP relationships has climbed from to 16 percent from 11 percent year-on-year.

Gensler dials back
As far as good news goes, 2022 has been relatively slim pickings. One potentially positive development for the private equity community, at least, has emerged this month from an unlikely source: the US Securities and Exchange Commission. Aides to SEC Chairman Gary Gensler have told private fund reform advocates to dial back their expectations so the chairman can focus on ESG and market structure proposals, our colleagues at Regulatory Compliance Watch report (registration required).

Under Gensler, the Commission has proposed a number of private fund regulation reforms and hinted that even more drastic changes were in the works, such as new definitions for accredited investors. Sources now say that SEC staff may not have the bandwidth to see the private fund reforms through amid pushback from some corners of the Democratic party and a House that swung Republican in November. Our take: Gensler is unlikely to abandon the cause altogether. Still, any private fund reforms may end up being softer than many in the industry had expected.

Essentials

LP people move. Alberta Investment Management Corporation’s head of private equity investing Mark Cormier has left the public pension after more than a decade and will join the Healthcare of Ontario Pension Plan’s private equity group in January, our colleagues at affiliate title Buyouts reported. He will focus on fund investing across PE, private credit, secondaries and venture capital, according to a HOOPP spokesperson cited in the report.

Cormier’s departure is among a series of people moves in the investor community. Greg Ruiz, managing investment director for private equity at the California Public Employees’ Retirement System left in November for a partner role at Jasper Ridge PartnersOntario Teachers’ Pension Plan‘s global head of equities Karen Frank – who also oversaw its PE portfolio – left the pension early this month, PEI reported. As we noted in July, retention and recruitment have become glaring issues for the investor community this year.  As financial markets head into choppier waters in 2023,  the need for experienced staff is essential.

The next big threat to fundraising success could be… not having a good enough ESG track record. That’s according to Coller Capital‘s latest barometer, out this morning, which found that around half of LPs surveyed would consider halting investment in a fund if the GP didn’t reach certain standards of ESG-related disclosure within three years. A further 22 percent of the 112 respondents said they would stop investing all together in three years if the GP did not reach certain ESG standards. Investors have spent years demanding more from their managers on the topic of ESG. So, while an average ESG track record for a GP may not be enough to stall commitments from most investors, it appears it’s still a consideration for the majority. More highlights from Coller’s report here.

Dig deeper

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

12 December

13 December

14 December

15 December

16 December


Today’s letter was prepared by Alex Lynn with Carmela Mendoza and Madeleine Farman.