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Investor Attitudes to Being a First-Close Investor – December 2014

by Karun Ahluwalia

  • 02 Dec 2014
  • PE

Preqin’s Investor Intelligence currently tracks 802 LPs that have expressed a willingness to commit to a private equity fund before it has held a first close. With fundraising continuing to be a demanding task, GPs are both more open and willing to offer discounts to early investors in order to secure commitments from LPs before the vehicle has held an initial close. 

A recent Preqin investor survey has revealed that investors are becoming increasingly interested in investing in a fund before it has held a first close, with 70% of surveyed investors revealing that they would either invest or consider investing in these vehicles. Benefits of investing before a first close for a private equity investor would include the negotiation of more favourable fund terms such as the potential for lower management fees, as well as the creation of stronger relationships with GPs. 

CPP Investment board is the largest investor that is willing to invest before a fund has held a first close. In the coming year it plans to target both buyout and growth vehicles globally. Similarly, the $30bn Kuwait Investment Authority is another first-close investor that plans to commit to new private equity vehicles across all geographies. Other large investors in private equity that are open to being first-close investors include Hamilton Lane, California Public Employees’ Retirement System and Pathway Capital Management.

 

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