PE Investors Lost in the Woods
Institutional investors typically evaluate more than 40 private equity funds per year and commit to just four, according to survey by researcher Preqin.
But with almost 2,000 funds on the road at present, limited partners have complained about a saturated private equity market that offers too wide a choice of fund managers.
General partners with a good track record, an experienced team and clear investment strategy stand the best chance of being selected, most LPs tell Preqin.
On the other hand, a quarter of the investors surveyed would avoid European-focused funds at present, and three-quarters said they will not back first-time funds.
“The best thing new funds can have in this climate is a compelling, fact-based, believable story for why their strategy will be successful,” says Bill Earner, managing partner at Connect Ventures, a London-based firm that is raising its debut fund.
Once they have chosen a fund, most investors expect private equity assets to perform at least 4% better than public markets, and small to mid-market buyout funds remain the most popular choice within private equity.
Globally, venture funds are also in vogue, with almost a quarter of investors considering them to offer the best opportunities in the current private equity market.
Russian Fund Wins European Money
The European Union’s European Bank for Reconstruction and Development (EBRD) has agreed to anchor a new fund from a Moscow-based private equity firm.
The EBRD will invest up to $50 million, and not more than a quarter of total capital, in Elbrus Capital’s second fund, which will acquire small and mid-sized companies in Russia and Commonwealth of Independent States.
A first close at $200 million is expected before October, following backing from two other development finance bodies. the fund is targeted at $500 million.
Elbrus’ previous, $324 million fund was inherited from Renaissance Group, an emerging markets-focused financial group that Elbrus spun out of in 2009.
Elbrus I is 80% invested and its remaining capital is reserved for add-on acquisitions.
Four Russian companies remain in its portfolio; these include a car dealership, a telecom company and a broadcasting group.
Compiled by Alex Derber