As institutional investors try to ramp up or maintain their commitments to private equity without spreading themselves thin on due diligence efforts, their increasingly concentrated investments have helped support a trend toward private equity mega-funds.

Concentration at the top poses some challenges, but investors aren’t fazed: Since 2015, fewer investors have sought to make four or more fund commitments annually and more are gravitating towards making two to three fund commitments, perhaps suggesting an increase in ticket sizes, research firm Preqin found. The increased demand, as well as a need to reinvest capital from older private equity investments, and new players like sovereign wealth funds and wealthy individuals, have pushed dry powder held by private equity fund managers to a record high of $1.09tn as of
March 2018.

Private equity managers with good track records are in high demand, and those managers are increasingly able to find enough capital to scale their efforts to previously-unheard of levels, according Christopher Elvin, head of private equity products at Preqin.

“There looks to be a trend towards mega-funds,” Elvin told MMR. “The private equity industry is seeing huge inflows, but investors are increasingly choosing to sink their capital in the largest funds. LPs (Limited partners) prefer to be involved with fund managers that have been successful in the past – with the expectation that those fund managers will be able to generate large returns in the future – and generally fund
managers don’t tend to raise large funds without building up a track record.”

Read the full story: Institutional appetite drives a rise in PE ‘mega-funds

Published by Money Management Report/Pageant Media.

The Los Angeles City Employees’ Retirement System (LACERS) remains indecisive about how best to proceed with its 14% allocation to private equity, with one member of the investment committee suggesting looking for a wider pool of consultants before proceeding with interviews of the three finalists identified after a recent search.

The $17bn fund’s private equity program has been unsettled since July of 2017, when the board blew up an ongoing RFP process and started from scratch. At that time, a board member accused the incumbent consultant – and investment staff’s preferred option for a new contract – of fudging the performance numbers for private equity programs managed on behalf of other pension funds. Other pension fund clients stepped to the consultant’s defense, and the consultant explained its methodology in a later meeting, but the bad blood caused by the incident caused the consultant, Portfolio Advisors, to withdraw from consideration during a rebooted RFP process. Now, LACERS is once again on the verge of making a selection during the rebooted consultant search, and once again, some board members seem dissatisfied with the process.

Read the full story: LACERS remains indecisive on private equity

Published by Money Management Report/Pageant Media.