How fundraising models will bifurcate PE market

Author: Danielle Myles | Published: 11 Sep 2013
  • An increasing number of small and medium investors are demanding separate accounts and co-invest arrangements with private equity managers;
  • Limited partners’ increasing leverage in the private equity dynamic could mean first-time and less successful managers will not have the option to raise funds through blind pools;
  • Investors in US funds are pushing for the European-style waterfall, which returns capital faster than the traditional deal-by-deal model.

Growing demands for customised arrangements are driving fundamental shifts in US and European private equity firms’ (PE) fundraising models.

The greater leverage shown by limited partners (LP) in the PE dynamic could create a bifurcated market in which only well-performing managers can raise funds through blind pools.

No longer reserved for the biggest institutional investors, separate accounts and co-invest agreements are being demanded by a...