Press mention from WSJ Pro – Private Equity
In Their Own Words:
Limited Partners/Placement Agents
LEE GARDELLA, managing director and head of risk management, Adveq
What surprised you the most in 2016?
How conventional wisdom lacks wisdom.
What do you think will be the biggest challenge your corner of the industry will face in 2017?
GPs staying disciplined on valuations in this market, given the need to deploy capital.
How will the fundraising environment look different in 2017?
Will have no effect on LP commitments. Allocations to private equity are increasing and more capital will be coming into the market. Dry powder levels will continue to increase in 2017.
JENNIFER RINEHART, partner and chief executive, Acalyx Advisors Inc.
What surprised you the most in 2016?
More institutional investors have become strikingly quick to decide which GPs they will seriously pursue. In a congested market where everyone has a sense of urgency, investors have been compelled to take a more binary early view, which they subsequently confirm or refute by dedicating resources to an extensive diligence process. Triage often weighs portfolio fit, runway for diligence and potential allocation as key factors in an initial decision. This diverges from the traditional approach wherein limited partners reviewed a broad set of facts and required longer lead time with a GP before committing to intensive diligence.
What do you think will be the biggest challenge your corner of the industry will face in 2017?
The general commoditization of PE ownership today is concerning—a GP can outsource everything from the IT in your office, the data analytics to India, the search firms that find executives and the consultants who draft 100-day plans. Finding GPs who have their own point of view, approach and execution but who can also demonstrate potential to repeat, evolve and institutionalize is the challenge for 2017 and beyond.
How will the fundraising environment look different in 2017?
While I believe [2017] is likely to be similar [to 2016], the fundraising environment will change for the worse at some point in the future. I believe GPs who are actively building a better practice, being good partners to their constituents in all parts of the cycle and thinking about how to continually improve their platform will prevail.
GREGORY STENTO, managing director, HarbourVest Partners
What surprised you the most in 2016?
The resilience in private-equity fundraising. Despite market events and volatility, we’re headed for a third straight year of more than $200 billion raised globally, levels we haven’t seen consistently since 2008. The low-return environment is attracting more institutional and individual investors to the asset class.
What do you think will be the biggest challenge your corner of the industry will face in 2017?
Capital flowing into the industry could put pressure on returns and lead eager or inexperienced investors to overpay for deals. The best response is to focus on strong secular trends, build diverse portfolios and select high-quality managers who are price-disciplined.
How will the fundraising environment look different in 2017?
As both a GP and an LP, we have a unique view into this relationship. The real point of contention may actually be among LPs and the growing number of new investors trying to gain access to the best-performing GPs. This two-tiered market—where some gain access and some don’t—is reflected in the rapid fundraising by certain managers who are able to raise larger funds and can find additional capital in the form of co-investment.
ASHBEL WILLIAMS, executive director and chief investment officer, State Board of Administration of Florida
What surprised you the most in 2016?
General partner discipline! The last few years have been characterized by record amounts of capital distributed back to limited partners and very successful fundraisings by GPs. Yet, in general, GPs have shown discipline when making new investments, evidenced by lower than expected deal volume and increasing amounts of dry powder in the industry.
What do you think will be the biggest challenge your corner of the industry will face in 2017?
Can private equity maintain its discipline? Do GPs eventually succumb to the “lower for longer” (low growth, low interest rates) train of thinking and begin to rationalize paying record purchase price multiples for new investments? Does this come at the exact wrong time?
How will the fundraising environment look different in 2017?
Probably not anything new, but the alignment of interests will always be an area of concern and focus for LPs. Improved transparency will go a long way toward alleviating this concern.
