WATCH: Cambridge’s Auerbach says GPs are returning to market too early

Managers coming back to market and raising ever larger vehicles present a red flag, according to Andrea Auerbach, global head of private investments at the investment consultant.

Are private equity managers coming back to market quicker than they should be? Yes, according to Andrea Auerbach, global head of private investments at Cambridge Associates.

Auerbach sat down with Private Equity International to discuss what is top of mind for institutional investors. Watch out for the full length interview available soon and in the September issue of PEI magazine.

“The velocity of fundraising feels like it has been accelerating,” Auerbach says in this 1-minute video. The combination of GPs returning earlier than they should be with them seeking higher levels of capital than previously signals a red flag for the investment consulting firm.

Private equity vehicles held final closes on $162 billion in the first half of this year, 43 percent lower than the $284 billion recorded in the same period last year. While final closes can be the best way to accurately document capital raised, they don’t take into account ongoing efforts. The likes of Carlyle Group, Vista Equity Partners and Ardian are all seeking to raise funds in the $10 billion-plus bracket, while Blackstone is on track to raise $300 billion over the three-year period from 2017-19.

Take a more detailed look at the numbers in this interactive presentation.


Private equity fundraising is frenetic. Are managers coming back earlier than they should?

We completely agree. The velocity of fundraising, it feels like it has been accelerating. The other thing we’ve been watching is when managers are coming back, they’re coming back earlier. They’re coming back earlier and they’re raising more money. Those two in combination signal a bit of a red flag – a bright red light for us. We know we are very late cycle in general and it definitely feels like we’re ticking down in the private equity realm.

Yes, managers are coming back a little earlier than we perhaps believe they should. Typically the threshold is two-thirds or three-quarters committed. I believe it’s typically committed or reserved. I think there’s a little bit of a moving target on committed versus reserved in the current environment than what we typically see.

We do encourage managers to just invest the capital, fully invest the capital and come back to us. There are certain mangers that are not quite meeting that level – the spirit of the intention, I would say.