Reach Capital at SuperReturn

It was all smiles inside a Berlin conference centre last night as dealmakers from across the global private equity market descended on the city for the industry’s annual summit, SuperReturn.

But while some buyout shops were toasting stellar returns and the close of record new funds at the evening champagne reception, there was caution in the air.

“This year the mood is a lot more sombre,” noted the head of investment at one of the world’s largest pension funds.

Questions over the global economic outlook are dominating the agenda, as private equity bosses question what effect inflation and slowing growth will have on their current portfolios and future deals.

“Everyone has their mind on the economic environment: both the likelihood of a recession coming, one which is maybe a longer and deeper one than the past recession two years ago, as well as what inflation means for private equity,” says Nils Rode, chief investment officer of Schroders Capital.

Rode adds: “The question is whether this is bad news. It also creates opportunities.”

Macro uncertainty is not the only cause for concern at this year's event, with the fundraising frenzy also posing challenges for some general partners (GPs).

First-time fund managers in particular are struggling to raise fresh capital, as they battle it out for the attention of limited partners (LPs) who are swamped with a record volume of requests for new commitments.

While the likes of Advent and KKR have recently closed record funds of $25bn and $19bn respectively, some smaller generalist managers and newer entrants are facing difficulties in hitting their fundraising targets.

With a flood of GPs coming back to market for new funds, LPs are having to commit more money to their existing relationships, leaving less money for new managers.

William Barrett, co-founder of fundraising advisory firm Reach Capital, says that he is seeing roughly one in five LPs backing first time managers this year, compared to three in five LPs two years ago.

“With first time managers' backer intentions in a tailspin, we definitely see a decrease in first time managers' representation this year.”

While Barrett says that new entrants are still attending the event to improve their visibility and reinforce the message of their determination to LPs, they face a tough task in raising capital.

“Going to SuperReturn 2022 as a first timer this year is as much an act of bravery as it is an excellent idea,” he says.

Karl Adam, partner at placement agency Monument Group, says that first-time funds have historically outperformed their more well established peers, but the strong macro environment until 2021 "most likely nullified some or all of that outperformance".

He adds: “Events like SuperReturn present a window of opportunity for first-time funds who are able to present face-to-face, which is important for building new relationships. Whether they’re able to stand out against all the other GPs clamouring for commitments is another matter, but there is a chance.”


Sebastian McCarthy
From Private Equity News : https://www.penews.com/articles/superreturn-a-party-of-the-haves-and-have-nots-20220615