Posted on October 30, 2023

Investor Relations People Moves Report, 2023

2023 Moves and State of the Market

The below commentary is written by Jonathan Press, Senior Consultant at Pearse Partners, complimenting the Investor Relations People Moves Report. (Available below)

Funds faced several challenges in 2022 and into 2023. Many LPs reduced their commitments to funds due to various factors (the denominator effect, impact of higher inflation levels and interest rates at a 14 year high). Despite these factors, high quality businesses on both the sell side (Private Funds Groups and Placement Agents) and the buy side are continuing to hire. Most impacted have been first time funds with little or no track record, with established names in both PE and PCA facing tougher fundraising but still going strong. Managers may need to offer more concessions on fees, co-investments etc.

From a hiring perspective, those businesses that have continued to hire in this tougher environment seem to be those that have a business that spans not only Private Equity but also Infrastructure and Credit. Credit especially has continued to be strong in 2023 with deals like BlackRock’s acquisition of Kreos Capital certainly bolstering this opinion. Also, new pools of capital, especially outside of the UK and US, have become increasingly important for GPs. I have recently worked on a number of opportunities focused on distribution across Europe (especially DACH and the Nordics).

Anecdotal evidence suggests that there could be a shift away from using Placement Agents and Private Funds Groups for primaries fundraises in the coming 18-24 months. As much as they have their place in the market and are a hugely important part of the fundraising process there could be a bit of a shift in how they are used. First, second and even third time funds will likely continue to use them much how they were before, however, more established funds will bring an experienced fundraising professional in-house to lead fundraising efforts. This has been the case for some time now, however, with fundraising periods extending from the standard “12 months” it may be felt by GPs that someone in-house could achieve this with perhaps using a Placement Agent or PFG to assist with pockets of investment in specific geographies they don’t cover personally.

The environment for fundraising is expected to remain competitive going into the final months of 2023, at least until public market volatility subsides and distributions from GPs pick up again. Nevertheless, most GPs remain positive about the long-term, believing this to be a relatively short-term market issue. However, as we head into 2024, fundraising may still be tough for GPs work to clear the backlog of record levels of dry powder despite LPs having more capacity to make allocations.

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