The complete LP view PERSPECTIVES 2019 What do LPs think of their - PowerPoint PPT Presentation

The complete LP view PERSPECTIVES 2019

What do LPs think of their managers? How do they feel about fees? What are they planning to do this year? Private Equity International ’ s LP Perspectives survey answers all these questions and more, providing a detailed overview of the asset class. Scroll through the slides or click on the links below to go to the key sections LPs' How PE in the How perspectives committed portfolio: investors feel in seven are LPs to attitudes to about charts GPs? allocation secondaries

From fees to style drift: what LPs really think PERSPECTIVES 2019

Click here The basics – starting with fees to read the full LP Perspectives report The crucial themes that govern LPs' thinking begin with fees but encompass restructurings, due diligence and more To what extent do you agree that fees charged by private equity ” At least one simple, funds are difficult to justify internally: low-cost passive strategy would have 2.4% 16.7% performed far better [than private equity], and saved a fortune ” 34.5% Joe Torsella, Pennsylvania state treasurer, speaking at the Pennsylvania Association of Public Employee Retirement Systems conference in May 46.4% Strongly agree Agree Disagree Strongly disagree Source: Private Equity International

Click here Restructurings are dif fi cult territory to read more on secondaries GPs are increasingly instigating restructuring processes on old funds to move assets into a new vehicle. LPs were asked in these circumstances, whether they believed: The costs of the process were fairly divided You have sufficient time to decide whether to between the GP and the fund? roll over or cash out? 22.0% 32.5% 42.7% 44.6% 35.4% 22.9% Yes No Not been party to a restructuring Yes No Not been party to a restructuring Source: Private Equity International Source: Private Equity International

Click here Style drift is a concern to read more on style drift This can take many forms – such as investing in a new sector, buying public stocks or acquiring larger companies Which best describes your assessment of GP investment behaviour in the last 12 months? 1.2% 8.3% 35.7% 54.8% “ Style drift tends to occur right now [in the cycle]. It doesn ’ t occur when you ’ re in a trough ” Andrea Auerbach, head of global I see occasional examples of 'style drift' among my GPs GPs are remaining disciplined and sticking to their investment thesis private investments group, Cambridge Associates I see widespread examples of 'style drift' among my GPs Other Source: Private Equity International

Click here Gender is on the agenda to read more on ESG Almost half of limited partners include pay disparity at the GP as part of their due diligence How significant a part do the following play in due diligence? 97.6 GP performance track record 91.6 8.4 GP team size and investment capacity 89.0 9.8 Investment thesis and style drift 61.0 39.0 Firm 'culture' at the GP level 60.2 39.8 Fund structural review 57.8 41.0 Succession planning and retention plans at the GP level Fee validation 52.4 45.1 GP balance sheet / fi nancial strength 19.3 66.3 14.5 4.8 38.6 56.6 Gender pay gap at GP level 0 10 20 30 40 50 60 70 80 90 100 % Forms a major part of the process Forms a minor part of the process Not covered in due diligence Source: Private Equity International

Click here There ’ s a stampede towards co-investment to read more on co-investment It has become a crucial part of the relationship between LPs and GPs Do you plan on investing in co-investment opportunities in private “ It ’ s gone from a equity over the next 12 months? topic at most fundraising 11.6% meetings, to a topic at every fundraising meeting ” Brian Gallagher, co-founder at Twin Bridge Capital Partners 23.3% 65.1% Yes No Unsure Source: Private Equity International

Click here Most LPs get full allocation to read the slides on allocation But just over a quarter have seen their allocations scaled back in most of their chosen funds Thinking of the fundraises in the last 12 months that you expressed interest in, which of the following describes your experience? We have consistently received our full requested 59.8 allocation in our chosen funds We have had our allocation scaled back in some of 3.7 our chosen funds We have had our allocation scaled back in most of 28.0 our chosen funds due to excess demand We have been unable to secure allocations in most 3.7 of our chosen funds Have not made any new commitments in the last 12 2.4 months Other 2.4 0 5 10 15 20 25 30 35 40 45 50 55 60 % Source: Private Equity International

Click here Asia is attracting more capital to return to the contents page PE has come of age in the region and global investors are arriving in droves Which emerging market geographies will you “ In the past five consider for investment over the next 12 months? years, nearly 40 percent of our global private equity Asia-Paci fi c 84.1 commitments have been to managers Central / Eastern Europe 39.0 focused on the Asian region ” Latin America 31.7 Art Wang, managing director, private markets at San Francisco Employees ’ Retirement System Middle East and North Africa 17.1 Sub-Saharan Africa 13.4 0 10 20 30 40 50 60 70 80 90 % Source: Private Equity International

The LP-GP relationship: how committed are LPs? PERSPECTIVES 2019

The GP-LP bond is strong Click here to read more From current ties to first-time funds, investors are positive about private equity on GP-LP relationships Thinking of your current fund manager relationships, would you like to increase, maintain or decrease the number of relationships? Private equity 52.6 29.9 11.3 6.2 Private debt 42.9 32.1 2.4 22.6 Private real estate 37.1 37.1 5.6 20.2 Infrastructure 28.4 37.5 5.7 28.4 0 10 20 30 40 50 60 70 80 90 100 % Increase Maintain Decrease Unsure Source: Private Equity International

Click here LPs want to recommit to existing managers to read about maintaining As well as increasing the number of relationships, LPs are also looking to reinvest with their current GPs relationships Thinking of your current fund manager relationships, do you plan to make fresh “ It ’ s a cycle; there commitments to these managers over the next 12 months? are periods when LPs retrench the 100 number of GP 90 11.2 relationships that 80 9.2 24.4 25.0 they have and then 70 32.2 gradually increase 60 them again if some % 50 27.3 of the existing 30.0 40 31.1 managers don't 30 perform and need 20 to be replaced ” Brad Young, head of global 10 advisory services, Pavilion 0 79.6 47.7 45.6 36.7 Corporation Private equity Private debt Private real estate Infrastructure Yes No Unsure

Click here Commitments are getting bigger to read the latest LP commitments The influx in capital is accompanied by a willingness to increase investment levels How will your average commitment size change over the next 12 months? 100 4.3 7.5 8.6 90 80 70 60 % 50 52.2 40 63.0 30 65.0 69.1 20 10 0 43.5 22.2 27.5 35.8 Private equity Private real estate Infrastructure Private debt Increase Stay the same Decrease Source: Private Equity International

Click here This appetite for PE brings competition to read more on allocations Excess demand has left some LPs having allocations scaled back in their chosen funds Thinking of your fundraises in the last 12 months that you expressed interest in, which of the following describes your experience? We have consistently received our full requested 59.8 allocation in our chosen funds We have had our allocation scaled back in some of 3.7 our chosen funds We have had our allocation scaled back in most of 28.0 our chosen funds due to excess demand We have been unable to secure allocations in most 3.7 of our chosen funds “ What's happened on the GP side is Have not made any new commitments in the last 12 2.4 months they've become a lot more thoughtful Other 2.4 about the kind of investors they want ” 0 5 10 15 20 25 30 35 40 45 50 55 60 % Jim Strang, managing director, head of EMEA, Hamilton Lane Source: Private Equity International

Click here Track record is a key consideration for LPs to read more on performance Performance is the main concern but LPs also monitor for style drift and the team's investment capacity How significant a part do the following play in due diligence? GP performance track record 97.6 91.6 8.4 GP team size and investment capacity 89.0 9.8 Investment thesis and style drift 61.0 39.0 Firm 'culture' at the GP level Fund structural review 60.2 39.8 57.8 41.0 Succession planning and retention plans at the GP level 52.4 45.1 Fee validation 19.3 66.3 14.5 GP balance sheet / fi nancial strength Gender pay gap at GP level 4.8 38.6 56.6 0 10 20 30 40 50 60 70 80 90 100 % Forms a major part of the process Forms a minor part of the process Not covered in due diligence Source: Private Equity International