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Private equity GPs fret over fundrising and regulation

06 February 2017

According to Augentius' annual industry survey, 51% of European private equity funds are concerned by market regulation for 2017

Read more: Augentius private equity administration Trump Brexit

Regulation and fundraising stood out as the most substantial challenges for private equity fund managers (general partners, or GPs) worldwide in 2016 and remain major concerns in 2017, according to research by private equity fund administrator Augentius.

The annual industry survey found that the biggest concern for GPs in the Americas and Asia for 2017 was fundraising, which was a challenge for 58% and 44% respectively. Fundraising was only the joint-third most widespread concern in EMEA, for 33% of GPs. 

Compared with 2016, the fundraising issue has however declined in importance in the Americas when it was a concern of 64%, was stable at 44% in Asia and increased from 25% in EMEA.

The most widespread concern for GPs in EMEA was market regulation, with 50% reporting it as a challenge. In the Americas and Asia just 34% and 38% respectively shared the concern.

Limited partners

Investors in private equity funds, know as limited partners or LPs, had a different set of concerns.

More than half of investors in both 2016 (55%) and for 2017 (56%) saw finding suitable investment opportunities as a challenge. Augentius raises the query of whether GPs are offering LPs the investment opportunities that they actually desire.

The second largest concern for LPs was "valuation issues" – an increasingly important issue for managers this year. 26% recorded it as a concern in 2016, which grew to 46% in 2017, and "one that managers need to pay attention to", according to  Augentius.

Unlike GPs, both market and tax regulation appears to be of less concern to LPs. In 2016, 44% saw market regulation as a challenge for the year and this figure dropped further to 30% for 2017.

By contrast, 46% of investors view valuation issues as a challenge for 2017, a significant increase from the 26% last year, prompting Augentius to ask: "Do managers need to be more open with their investors on valuation policies?" 

It also raises the question of whether managers should give more consideration to third-party valuations.

Over a third of LPs revealed their frustration at lack of transparency around fees, with a similar percentage concerned about the late delivery of manager reporting.

With regards to LP’s views on fund administration, a considerable 62% agreed that fund administrators deliver good value for money. 

While the speed of reporting is the same as if done "in-house", 60% of LPs do value the independent oversight provided.

Political factors

There were diverse views on the political landscape and how events such as Brexit and the US election will impact activity during 2017 .

60% of GPs from the Americas believe that 2017 will be better than 2016. They are less concerned about legislation, perhaps in anticipation of new president Donald Trump and likely changes in North America.

They present the view that Trump may in fact reduce the level of regulation and create new investment opportunities, both in smaller companies and infrastructure.

EMEA managers were also positive, with just over a third predicting that this year will be an improvement from last.

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