Private Equity Investors’ Attitudes Towards Forming New GP Relationships – October 2014

by Alastair Hannah

  • 22 Oct 2014
  • PE

As investors plan to make new commitments to private equity funds, a significant number expect this to involve forming a new relationship with a GP. Research carried out by Preqin at the end of June 2014 for the Preqin Investor Outlook: Alternative Assets, H2 2014 found that of the investors looking to make new commitments in the next 12 months, 83% will either be seeking or considering forming new relationships with GPs, as can be seen in the chart below. Furthermore, the study found that over the longer term, 39% of investors surveyed expect to increase the number of GP relationships in their portfolios. 

Preqin’s Investor Intelligence contains detailed information regarding investors’ future plans in the asset class. Zurich Invest, a Switzerland-based asset manager with CHF 15.5bn in assets under management, is among investors that are primarily looking to invest with new fund managers over the next 12 months. Its primary focus will be on buyout, distressed debt and special situations vehicles in Europe and North America. The asset manager expects to commit between $50mn and $60mn to between four and six funds.

It should also be noted that LPs seeking to make their maiden investments to the asset class can only seek new relationships with fund managers. For this reason, new LPs are likely to account for a proportion of investors in the private equity space that seek to work with new GPs. A recent example of an LP making a maiden commitment to the asset class includes a $16mn commitment by El Paso County Retirement Plan to Private Advisors Small Company Buyout Fund VI, a North America-focused fund of funds vehicle.

For many investors, re-upping with existing managers in their portfolio provides a certain degree of comfort, building upon an existing and hopefully successful relationship with the GP. However, as LPs desire greater diversification, perhaps looking towards different markets for exposure, reaching out to new fund managers is a necessary step towards achieving such long term goals. Actively forming new relationships with fund managers is perhaps indicative of an appetite for investor mobility between markets.  

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