August 20, 2018
LPs Eyeing More Alternative & Direct Investments?
There are some interesting responses in Intralinks’ recently published 2017 Limited Partners Survey. Here are some of the highlights:
– More than 1/3rd (35%) of LPs confirmed that their current allocation to alternative investments was more than 30%, with one in five committing up to 10% to alternatives.
– Poor performance and outflows of $102 billion in 2016 would suggest that hedge funds have lost a bit of their lustre. At the same time, private equity funds have gone from strength to strength. Last year, 917 funds closed, raising $372 billion of aggregate capital. With to real estate funds, total fund numbers rose between January 2016 and January 2017 from 493 to 533. Last year, this asset class attracted USD117 billion in net inflows.
– One of the ongoing issues and sources of frustration among LPs is the level of transparency they receive. The survey findings underscore this, with more than half of respondents (54%) confirming that there were only “somewhat satisfied” with the level of transparency they receive from fund managers.
– More than 2/3rds (68%) of LPs said that co-investment opportunities were either “very important” or “somewhat important” to them.
– Of those that were interested in direct investing, 60% said that they had increased their pace of direct investing – as opposed to allocating to funds – over the last three years.
While private equity remains a popular alternative investment destination, LPs’ increasing interest in direct investments may mean that there are storm clouds on the horizon for PE funds. There was $846 billion of PE dry powder as of March 2017, and “the more that LPs look to invest directly the more potential there will be for asset prices to rise and for deal opportunities to contract.”
– John Jenkins