Specialisation key for first-time funds

European private equity fundraising has continued to struggle under the weight of the credit crisis, as well as the recent economic woes in Greece and parts of Southern Europe. GPs seeking capital have to answer a lot more rigorous questions, including the people that will manage resources, as risk averse LPs become more selective about who they commit funds to. With a number simply looking to re-invest with managers they have had previous relationships with, first-time fundraisers may find a headache quickly turns into a migraine.

“In general, what you will see is LPs concentrating their allocations to fewer funds,” says Adam Turner, head of private equity practice at Odgers Berndston, a London-based senior executive recruitment company. “In the next vintage, GPs are going to be working twice as hard for half as much capital.”

To differentiate their investment story, some new fundraisers are looking to come to the market with specialist funds. As such, they are seeking out highly specialised senior executives to oversee the vehicles, which also strengthens their people-pitch to LPs. Rather than raising a European generalist fund, which was popular in the 2006-2007 vintage years, some are looking to raise sector-focused, multi-region funds.

“One of the interesting things we have worked on this year is putting together specialist teams that will manage first-time funds that are specifically focused around one vertical sector, such as agriculture or energy,” notes Turner. “As such, they will operate as a specialised fund across geographical boundaries, with a team that is highly specialised in the sector they are looking to focus on.”

Some of the most recent focus has been on the retail and consumer sectors, which have shown resilience over time, with some also looking into the financial services segments. However, in recent times, some have also been looking at areas not traditional to European private equity investing, such as agriculture and oil & gas. Many are also looking to broaden their geographical focus to include areas such as sub-Saharan Africa.

“This is quite different from the 2006-2007 vintage years, when GPs were raising generalist funds. As such you would have a fund covering everything from retail to technology, but focused only on Europe, or maybe just Europe and Asia,” says Turner. “Some newer GPs may not be able to raise funds of that nature at the moment, and we are seeing people putting together teams to raise more specialised funds.”

This indeed may be the way to go, with the fundraising market not showing a major recovery this year. Whether this will revive the market or not remains to be seen. 

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• DACH
• CEE
• Southern Europe
• France
• UK / Ireland
• Nordics
• Fundraising