Preqin Investor Network’s Blog takes a closer look at the industry from the institutional investor’s perspective.
When investment professionals have successfully sought out the best private equity fund opportunities in market, they are then faced with the further challenge of gaining access to these top-tier fund managers’ funds.
Top-tier vehicles can become quickly oversubscribed; due diligence must be well considered, but investment professionals must also be willing to make swift commitment decisions. Furthermore, accessing these funds becomes all the more challenging as these top-tier fund managers are often perceived to be particular about their investor commitments.
What are the best practices for investors trying to access top-tier fund managers’ funds? Preqin Investor Network spoke to 140 leading placement agents and investment consultants worldwide to find out their opinions on what they believe these managers look for from investors.
Placement agents and investment consultants both stated that willingness to make a sizeable commitment to their fund is the most important trait that fund managers look for in their commitments, with 83% of placement agents and 78% of investment consultants citing this to Preqin Investor Network. A notable proportion of service providers also stated that fund managers much prefer to accept commitments from investors that intend to be long-term partners, rather than making one-off commitments.
Although there has been a general trend towards better fund terms alignment in the industry, Preqin Investor Network’s survey results suggest that investors should remain realistic about negotiating terms with leading industry performers. Forty-three percent of placement agents and 41% of investment consultants stated that fund managers look for investors that are flexible with fund terms and conditions. Furthermore, being too demanding with these terms and conditions is seen as the biggest factor leading fund managers to decline investors, with almost all placement agents questioned stating this as a significant barrier to entry.
Take a closer look at the best practices that service providers recommend to investors trying to access top-tier fund managers’ offerings, along with detailed interviews from Eaton Partners and Mercer, in Preqin Investor Network’s report, Key Due Diligence Considerations for Private Equity Investors, available from 23rd July.