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Fundraising
By: Bill Bormann & Jay Maher
The amount of capital raised decreased significantly in the second half of 2008 and has continued to diminish throughout 2009. A number of factors have been responsible for this decline:
- Limited Partnerships (LPs) are over-allocated to the asset class due to overall decrease in their portfolios;
- LPs are looking for more liquidity and are hesitant to commit capital to fund managers; and
- the non-existent IPO market is not allowing funds to exit deals. The venture capital market has been particularly affected by the lack of IPOs.
At the same time, there is great optimism that this downturn in the economic cycle is creating new ideas from entrepreneurs, in turn creating good value for venture capital firms willing to invest. In the LBO market there are concerns that a majority of the debt will mature in 2012-2013 and this, in turn, is affecting how LPs view these deals. There is confidence that firms will find a way to deal with the debt through M&A deals and restructuring the financing.
While the past year has not been great for fundraising, there remains strong optimism that conditions will improve as firms redefine the LP/GP relationship, the abundance of great values makes itself felt, the asset class is validated by improved governance, and of course the growing global economy – China and Australia have been mentioned as two economies that can expect first-class deal flow over the coming years.
With commitments to PE firms down, the need to run their back offices cost-effectively is more critical than ever. While many PE firms continue to administer their fund in-house, many are also finding a more efficient solution by outsourcing the accounting and administration of their funds. As part of the fundraising process, investors (both high net-worth individuals and institutional) are requiring more due diligence on a PE firm's back-office operations. Furthermore, many investors prefer the advantages of a third-party administrator.
SS&C Fund Services offers independent, comprehensive yet flexible administrative services for private equity funds and related management companies. Our unparalleled knowledge of the industry and our commitment to understanding the economics of a deal ensures that governing documents reflect these realities before operations begin.
For expert, detailed and relevant advice on how to choose a fund administrator, click here.
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This article first appeared in the 11/13/2009 edition of our Alternative Investments eBriefing.
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