Pledge funds not a panacea, says SJ Berwin's Sonya Pauls

In the current fundraising market, GPs unable to attract ever so selective LPs might be tempted to do away with the traditional, 10-year LP fund altogether and raise capital on a deal-by-deal basis instead – a route Duke Street recently chose, for instance.

But beside the obvious advantage of a quicker and perhaps more efficient fundraising process, SJ Berwin partner Sonya Pauls, addressing delegates at the 2012 unquote" CEE Private Equity Congress, pointed to the potential financial upside for a GP in that situation: "Carried interest can be charged on a deal-by-deal basis, as opposed to the fund-as-a-whole model adopted for the vast majority of traditional closed-end vehicles – this can definitely be a better deal for GPs."

That said, Pauls also highlighted the many downsides of the deal-by-deal fundraising model. First of all, she noted that adopting such a model might put GPs at a competitive disadvantage come deal-doing time, as it would be seen as less convincing in terms of deliverability.

"It also raises the question of who actually owns the track record," Pauls continued. "The private equity house, or a small group of investors able to cherry-pick the best investment opportunities?" She also warned that GPs going to investors for funding on a deal-by-deal basis risk seeing their "story" weakened by definition – as they could be perceived as not attractive enough to raise a traditional fund in the first place.

Euro funds still attractive
Touching on broader fundraising issues, Pauls noted that continental GPs are not necessarily suffering from investor concerns about the eurozone crisis. "We have seen a few strong fundraises lately, and the most oversubscribed examples have been euro-denominated," she said. "These could have chosen another currency to raise their fund but stuck to the euro."

That said, Pauls also stressed that the market remains strongly bifurcated. "GPs that have a strong story to tell have never been in a better position to raise a fund," she said, before adding that this strong "flight-to-quality" phenomenon had seen many managers – including brand-names – struggle to attract commitments.

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• Fundraising
• SJ Berwin