60 Seconds with Dermot Crean

01 June 2008

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Francois Rowell speaks to Dermot Crean, placement agent for Acanthus, about current fundraising trends.

What is the current LP sentiment?

Certainly there has been pullback from LPs concerning large buyout funds but we have seen no real change in the mid-market in which we operate, interest in the mid-market continues to be strong. Most LPs have significant funds to invest and are thinking on a long-term scale so if anything there have only been slight migrations in LP sentiment. Access to top performing mid-market funds remains an issue.

What areas seemingly interest LPs more?

Based on our bottom up estimates of funds in and coming to market, we anticipate further growth in mid-market fundraising for this year from EUR23.5bn raised between 82 mid market GPs last year and an estimated EUR26bn between 81 GPs based in the Western European and CEE regions this year. This excludes a few GPs that will probably break through the EUR1bn barrier for the first time. We do therefore feel that the mid-market is definitely an area which has retained LP interest.

LPs are showing a particular interest in growth funds, particularly those in Emerging Europe. They are also showing strong interest in distressed/special situations funds as a result of the investment opportunities created by the credit crunch.

What are LPs looking for in GPs?

LPs are always searching for the top performing GPs and it's an important signal for them to see GPs investing significantly in their own funds as a show of confidence in their own abilities. The mid-market tends to see much stronger goal alignment with LPs, underpinning its strengths.

Sector specific strategies are becoming more prevalent as direct sourcing and real value added become the key differentiators. In France, LPs find it difficult sometimes to differentiate GPs as they tend not to be as differentiated by investment strategy but more people and network oriented. LPs need to focus even more than usual on individual relations and track records as well as the general partner's overall track record.

What are your thoughts for the future?

We anticipate that the mid-market will remain strong, particularly in the growth area. There could be more spin-offs as successful GPs raise much bigger funds and move out of the core mid-market. The special situations market will develop strongly in the aftermath of the boom years. The coming years may also see more sector specific funds particularly in healthcare, energy and the financial sector where specialisation is critical and a continued interest in mezzanine funds which we can observe at present.

Acanthus are acting as placement agents for the new Aurel Nextstage FCPR fund.