Andrea Auerbach, global head of private investment research at Cambridge Associates, offers an in-depth perspective on the state of the private equity industry, starting with “now is the right time to sell.” She touches on new strategies, pressure on GPs to generate returns, evolution of fee structures, co-invest opportunities, fundraising, and more.
Highlights of Auerbach’s commentary include:
- “What we are seeing is that US fundraising is getting ‘toppy’. It’s not yet setting record-breaking levels, but it is noteworthy.” She thinks that 2017 could come close to the 2007 figure, suggesting that if one factors in co-investment activity, which is a non-reported figure, new capital flows for PE this year could approach USD240 billion to USD250 billion.
- “The challenge isn’t can [GPs] put [a fund] to work. It is can they put it to work to generate a compelling return for their LPs? “
- Fragmentation, or “off-shoots from plain vanilla PE strategies are all in pursuit of finding and generating compelling returns for institutional investors in this current high valuation market environment.”
- “We have a co-investment practice advising clients and my estimate is that co-investment activity could easily be 20 to 25 per cent of all capital being deployed in the market, and it’s not reportable so very difficult to accurately track. On the back of the USD200 billion or so raised in 2016, you could add another USD40 billion on top (in 2017).”
Read the full article here.