Private equity GP outlook: A year of two halves

By A Paris — Though the Covid-19 speedbump hit the private capital markets hard, as it did all other sectors, the industry witnessed a steady rise in investor appetite with large amounts of capital waiting to be deployed.

“The strength and speed of the rebound suggest resilience and continued momentum as investors increasingly look to private markets for higher potential returns in a sustained low-yield environment,” outlines the McKinsey Global Private Markets Review 2021.

Alice Langley, partner, investor relations, IK Investment Partners comments: “Businesses and investors alike were faced with unprecedented challenges, with the private equity (PE) market experiencing a small degree of volatility and uncertainty in the first half of the year. However, mergers and acquisitions activity rebounded towards the second half of the year, leaving the PE market relatively unscathed.” For IK, this year’s winner of the Best Fundraising Firm – Mid-Cap Buyout, 2020 was a record-breaking year in its 31-year history. “Our firm was fortunate enough to remain resilient despite the significant headwinds, utilising opportunities for growth as new trends emerged,” Langley explains.

Discussing the developments, Christian Böhler, Head of Secondaries at Best Secondaries Manager (fund size <USD1 billion) Unigestion notes: “In the last year, we have been raising our direct/co-investment fund (Unigestion Direct II) and our secondary fund (Unigestion Secondary V). Two trends have been driving the investment opportunity and thus the client demand for these products. At the small end of the market, we have seen a continuous rise in high quality deal flow from investment partners who want us to partner with them. These investment partners are existing GP relationships, new GP relationships and, increasingly, specialist investors who do not manage funds.”

Michael Lindauer, co-CIO of Private Equity at Allianz Capital Partners (ACP), acknowledges the “increasing recognition of PE as a valid alternative to public markets, given its active ownership model driving long-term value creation. In an environment of low interest rates, the relative attractiveness of private market strategies has increased further.” For ACP itself, this was also proven true during 2020, when despite the obvious disruption through Covid-19, the firm continued to increase its exposure to PE on an unchanged basis. “It further became manifest for ACP in the successful raise of two infrastructure-related new funds from internal and external clients, totalling EUR2 billion of commitments,” Lindauer says. ACP won Best Fundraising Firm – Fund of Funds.

Considering the fortunes of the secondaries space, André Aubert, Partner at this year’s Best Secondaries Manager (fund size >USD1 billionn), LGT Capital Partners remarks: “The recovery came as US public markets posted strong performance and managers reported better-than-expected Q2 2020 and Q3 2020 NAVs alongside robust fund distributions. Although overall 2020 secondary transaction volume fell by nearly a third from the previous year’s record of USD88 billion, H2 2020 volume of USD42 billion was only slightly lower than in H2 2019.” Throughout 2020, the firm was in the market with its fifth dedicated secondaries fund, Crown Global Secondaries V and raised USD4.5 billion to capture investment opportunities in private equity secondaries, ranging from the acquisition of diversified portfolios of limited partnerships interests to GP-led fund solutions.

Michael Rees, managing director and head of Dyal Capital Partners, voted Best Growth Manager, says: “The trends both witnessed and experienced over the past year have not only reinforced our objective to partner with leading managers, but to be the solutions provider for the alternative industry and invest across the capital structure.

“The pandemic only accelerated trends that were already in motion, we anticipate that established firms will continue to raise an outsized share of capital, and we are pleased that we continue to be a preferred partner for them.”

Mapping the outlook for the industry, Joana Rocha Scaff at NB Private Equity, notes: “Demand for private equity will remain high and the fundraising market strong. Access to top-quality funds will be critical and valuations for well-positioned and attractive companies will remain elevated. Asset selection and value-add post investment will be crucial for GPs to drive attractive long-term returns.”

NB Private Equity, awarded the Best Fund of Funds Manager, manages over USD95 billion of investor commitments across primary funds, co-investments, secondary investments, private credit and specialty strategies, through both commingled funds and custom accounts for larger investors.