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Three themes to watch for private equity in 2019

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Ahead of SuperInvestor 2018, we invited our producer, Amelia Offer, to share her thoughts on the highlights of the event, and the topics everyone, GPs and LPs, should look out for as we look towards 2019.

I’ve really enjoyed constructing the SuperInvestor agenda this year and it’s time for me to share some highlights. This year, there are some real game-changers.

Secondaries: now the innovators of private equity?

The vast size of the secondaries market has been talked about for a while now. But it’s getting interesting, really interesting. Increased saturation and competition is making it harder than ever to secure a good deal. Coupled with a private equity market that is maturing and a host of funds in need of new management or fresh capital, the stage has been set for a new generation of deal-making. The industry is getting creative and it’s no longer good enough to sit back. Active portfolio management, GP-led and referred equity stakes are some examples. This prompts us to as a number of questions. How is the overall risk of investing in secondaries changing? Do the returns justify the extra legwork and complexity of some of these novel transactions?

Let us shine a light on GP-led deals. Already somewhat in the mainstream, these transactions are now on the daily agenda. The hit rate is low. It takes a lot to ensure the stars align and a number of potential transactions never make the finish line. However, it is undoubtedly the topic du jour. With so many different stakeholders involved and a relatively new road for many to travel, it’s a crucial that an on-going dialogue is maintained and going to be an important theme at this year’s SuperInvestor.

Fundraising, fundraising, fundraising.

Record fundraises, fund size inflation, product proliferation, revised terms and a record number of spin outs; these are just some of the consequences of an increasingly overheated fundraising market. However, we know that the story isn’t the same for everyone and some managers are having a much harder time than others. Unpicking what lies behind the fundraising success of different firms is hugely interesting and not as obvious as you might think. It brings to light many questions. How and why do the largest GPs continue to dominate? Are independent country focussed GPs being crowded out of the market? And as for the funds who are riding this incredible fundraising wave, what will happen when the music stops? And this is just the start.

And one more thing…credit lines

Unprompted, this topic was the most referenced to me when conducting research this year, by both investors and fund managers. The use of subscription lines isn’t a new phenomenon, but the use of such credit facilities is increasing. It still doesn’t seem to sit well with a number of LPs, but not all feel this way, making it a hugely interesting topic for debate. What is causing this divide? What are the long-term implications? For example, could warrant the current IRR benchmarked measurement redundant? It seems this discussion still has a long way to go.

Understanding what LPs want, how they view the market and the forces at play shaping the decisions they do (and don’t) make seems to be more important than ever. With LP/GP relations at the core of the SuperInvestor agenda, we are looking forward to immensely timely and provocative debate this year. See you there!

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