LPs lower expectations for PE, fret about deal flow

A majority of PE investors expect returns in the asset class to decline in coming years, and a growing percentage are beginning to vet potential partners on their ability to drum up deals.

GPs and LPs expect returns to decline, and both are concerned about competition for deals and high purchase prices for companies, an eVestment survey shows. But LPs are more pessimistic: 41 percent of investors said they were very or extremely concerned with competition for deals, compared with 25 percent of fund managers.

“Competition for deals was the number one concern for both fund managers and investors,” said Graeme Faulds, director of product for private markets at eVestment. “From the investors’ perspective, there is concern about the amount of dry powder in the market, and that is probably what’s driving this concern regarding the competition for deals.”

Competition took a much more prominent place among industry concerns compared with 2018, when survey respondents ranked it as the fourth-highest concern.

Check out the full story, published by Buyouts: https://bit.ly/2RibZcD


Five Questions With Aberdeen’s Whit Matthews on spinouts and independent sponsors

Whit Matthews is a senior investment director at Aberdeen Standard Investments. He spoke with Buyouts about Aberdeen’s approach to spinouts, independent sponsors and first-time managers.

What types of emerging managers get your attention at Aberdeen?

There are typically two types of emerging managers in this market. You have the groups that spin out of another firm. They have track record attribution, they’ve all worked together before – it’s a directionally clean story, and those managers tend to get traction quickly and raise successful funds in relatively short order.

At the other side of the world, and there are more of these types of managers, you have the professionals that haven’t run a firm before, they haven’t managed a portfolio before, and maybe they they haven’t worked together before. In those types of situations, operating as an independent sponsor and proving out your ability to drive deal flow, get deals done, and work with your new partners under a new umbrella is something that a lot of LPs want to see.

Check out the full interview, as published by Buyouts: https://bit.ly/2ImzGxp

Five Questions with Makena Capital’s Brian Rodde on first-time funds

Makena Capital is a perpetual-capital manager that commits about $600 million a year to PE. Buyouts spoke with Managing Director Brian Rodde, who oversees portfolio management and manager selection in buyouts and VC, about first-time fund commitments.

Some LPs, pensions in particular, try to mitigate the risk of first-time funds by committing lower amounts and by betting small parts of their portfolio on emerging managers. What’s your view?

We want to make sure that every investment we make is impactful to our portfolio. We don’t think it makes any sense to make a smaller commitment to a smaller fund [just to avoid] being too concentrated within that fund.

Check out the full article, as published on PE Hub: https://bit.ly/2KT7aoQ

Five Questions with Stanford’s Ashby Monk on fee transparency

Stanford University Prof. Ashby Monk advises pensions on innovative approaches to PE. He spoke with Buyouts about the dangers of pension fund complacency toward high PE fees.

You recently took to Twitter to disagree with a pension fund CIO who was happy to spend millions in PE fees to get billions in returns. Why?

In saying “millions to get billions,” you are in effect justifying a high fee to an external partner solely on the basis of the performance delivered. But defining performance in absolute terms like this tells you very little. It doesn’t tell you how much risk they took, it doesn’t tell you the strategy or whether that strategy is commoditized. It doesn’t tell you if you could and should build that strategy internally or find partners that can offer better terms.

Check out the full article, published by PE Hub: https://bit.ly/2x5c3CZ

New placement agent focuses on niche firms, global opportunities

APT Fund Advisory, a new placement agent, is trying to connect smaller global GPs following niche strategies with large North American investors.

The New York firm is helping raise five funds: a Brazilian early-stage venture technology fund, a European consumer-buyouts fund, an energy-and-minerals operator fund, and a tech-focused private credit fund that lends against enterprise value rather than Ebitda. All funds are targeting $500 million and below, and two are first-time funds managed by experienced investors.

The funds’ specialized nature speaks to a growing place for sector specialists in LP portfolios, said partner Terry Wetterman.

“LPs have gotten more comfortable with more and more specialized managers going after niches, so long as they’re getting at opportunities in a proprietary way, or they’re able to add some kind of value that a generalist wouldn’t,” Wetterman said.

Read the full article, as published by Buyouts: https://bit.ly/2xkkfzA