Covid-19 bifurcates fundraising trends in alternatives

On the 11/09/20 at 7:55AM


Tuba Raqshan

While private equity and venture capital funds (PEVC) assets under management are predicted to double, younger GPs are struggling to raise funds due to the changes brought about by Covid-19.

Alternatives data provider Preqin forecasted that PEVC assets under management (AuM) from $4.41tn at the end of 2020 to $9.11tn in 2025. The Future of Alternatives 2025 survey revealed that 23% of respondents expect to significantly increase allocations to private equity by 2025, with a further 56% planning a slight increase. However, the effects of the Covid-19 have resulted in younger, lesser-known GPs are struggling for fundraising.

Ophir Shmuel, managing director, co-head of EMEA, Eaton Partners, underlined that he sees a strong alternatives trend fuelled by low interest rate environment. “The underlying trend within the private equity space is the pronounced bifurcation in fundraising. Larger GPs are getting more fundraising faster while younger, lesser-known GPs are struggling,” said Shmuel, during the Future of Alternatives 2025 – EMEA webinar.

Mattias de Beau, partner, primary investments, Adams Street Partners said that it is a struggle for newer managers unless they are coming from established fund houses, where previous LPs already had a relationship. “Investing in funds where there is not already an existing relationship will be different,” said de Beau. The variance of returns in private debt doesn’t warrant LPs taking a risk with a new manager, added Lucien Cipollone, associate partner, Capstone Partners.

The Covid-19 has accelerated technology and transformation in this space. Daniel Grosvenor, partner, head of UK government and infrastructure team, Deloitte, said that more GPs are using AI and other technologies on deal sources and information gathering. “It can give you another angle on a business and sector on stress and alpha perspectives. However, there is still a need for human intervention. Now, a number of clients are using AI to get an edge on where there is a lack of public information. ESG is another area where AI is used to make non-standard data usable within sensible metrics,” added Grosvenor.

During due diligence, there is more benefit from better tech, said Guy Lodewyckx, head of private markets multimanagement, Amundi. “We could be more efficient if we were homogenous. It would facilitate everybody’s work, if there was more standardisation,” he concluded.