Private equity GPs downbeat on future funds

The proportion of private equity general partners (GPs) who believe the economy will pick up has fallen from 81 per cent to 57 per cent, new statistics show.

Findings from Investec Fund Finance reveal that GPs are less positive about growth prospects over the next 12 months despite a majority still predicting an uptick.

The survey shows that only 31 per cent predict that their firm’s next fund will be larger than the current one, a fall of 12 per cent on the finding from 12 months ago.

Furthermore, of those that forecast a bigger fund, 70 per cent say that it will be no more than 20 per cent larger, significantly less than the 85 per cent figure a year previous.

Simon Hamilton, head of fund finance at Investec, comments, ‘While the majority of GPs remain optimistic about the UK economy’s growth prospects, the findings paint a very different picture from last year’s bullishness.

‘Concerns around fund raising have become more acute and as conditions show little sign of improvement it’s likely that more firms will end up with funds that are either the same size or smaller than the current one.’

The current economic climate was rated by 77 per cent of respondents as ‘very poor’ for the raising of a new fund, up from 72 per cent 12 months ago.

Research published by Investec in February indicated that GPs were feeling the pressure to invest personal capital in their own funds due to forces from limited partners (LPs).

Hamilton adds, ‘Despite battling against tough economic headwinds, the private equity industry continues to demonstrate resilience and tenacity; levels of optimism are significantly higher now than in 2009, when 11 per cent of GPs predicted they would not raise another fund. This year the figure has more than halved to 5 per cent.’

Research was conducted by Investec Specialist Bank in February/March 2012 and pooled the views of 61 senior practitioners in UK-based predominately mid-market private equity firms. Some 28 per cent of respondents were from funds greater than £500 million in size.

Hunter Ruthven

Bernard Williamson

Hunter was the Editor for from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.

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