10 Updates

Competition heats up as private equity funds seek new capital

Apr 10 2014, 3:26pm CDT | by

Signs of momentum that began to build in private equity (PE) fund-raising in 2013 look primed to gather force in 2014. Indeed, as we described in Bain & Company’s latest Global Private Equity...

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15 weeks ago

Competition heats up as private equity funds seek new capital

Apr 10 2014, 3:26pm CDT | by

Signs of momentum that began to build in private equity (PE) fund-raising in 2013 look primed to gather force in 2014. Indeed, as we described in Bain & Company’s latest Global Private Equity Report , the dynamics that are coming into focus on the supply-and-demand front suggest that 2014 could be a year of transition, marking the end of one long PE cycle and the start of a new one.

Following successive lean years when payouts from their PE investments trickled in slowly, limited partners (LPs) now find themselves in an unaccustomed new situation. For a third successive year, the cash returned to LPs in 2013 has well exceeded the amount of capital general partners (GPs) called from them to fund new acquisitions. Cash distributions are set up for more of the same in 2014 as GPs continue to aggressively harvest the $2.4 trillion worth of unrealized investments in their portfolios. Barring a big spike in new acquisitions, we expect distributions to continue to outpace capital calls.

More cash flowing in than flowing out will leave an increasing number of LPs short of their target PE allocations. In fact, 39% of LPs surveyed by Preqin, a leading PE industry data source, last December reported that their PE holdings as a percentage of their total assets under management had fallen below target. Another 44% were at target, and based on current trends, more will be likely to slip below.

Many LPs that find themselves short of their target PE allocation will be eager to pick up the pace of new fund commitments to close the gap. PE fund-raising could see a big upswing. The rebound in PE returns that helped reinforce PE’s performance edge will add to yield-hungry LPs’ inclination to increase their PE exposure. Just how much LPs will increase new PE commitments to restore their PE holdings to the balance they aim for, however, will vary widely from investor to investor.

Meanwhile, on the supply side, there were already a large number of GPs on the road as the year began, offering some 2,050 funds and seeking to raise $740 billion. More GPs will be sure to join them throughout the year, looking to tap the currently receptive market.

However strong LP demand proves to be in 2014, it cannot accommodate this abundant level of supply. To grasp the dimensions of the oversupply, Bain compared the ratio of the amount of capital GPs sought to raise with the amount they actually managed to bring in over the years. Since the financial crisis, that ratio has hovered above three to one (see figure). Even with LP interest in committing to new offerings picking up, the ratio of the amount of capital GPs seek to raise to the amount they will actually manage to bring in during 2014 will be unlikely to fall much below the 2.6 to 1 it reached last year.

The crowded and intensely competitive environment will make for tough fund-raising conditions for all but the best GPs. Those that hope to succeed will need to withstand LPs’ more exacting winnowing process. The winners in the fund-raising race will be able to demonstrate a solid track record of success based on their ability to create value in their portfolio holdings. They will be led by a stable management team with a history of success working together and a clear succession plan that anticipates changes. They will be able to spot attractive market opportunities and articulate a compelling investment strategy to capitalize on them. They will nurture differentiated strengths that enable them to generate alpha, and they will hone a repeatable model that enables them to create value post-acquisition and demonstrate an ability to execute growth strategies.

Recognizing that fund-raising is and will remain more demanding and unpredictable, leading GPs are elevating their fund-raising game from a campaign mounted every few years into a set of five integrated core competencies they refine year-round. First, the leaders carefully flesh out their long- and short-term capital needs and map out their fund-raising schedule well in advance. Second, they build an objective fact base of where they stand with LPs, using the insights from this LP due diligence to fine-tune their approach. Third, they prequalify their target LPs, work to understand their needs, objectives and vetting procedures, and choreograph their optimal LP-portfolio mix. Fourth, they sharpen their sales pitch, making their investment angle clearer, more consistent and more compelling by backing it up with demonstrable facts and results. Finally, they strengthen their investor relations capabilities to become more transparent in their communications and better at reporting on the health of their investments. Firms that can bring these competencies to bear will be better positioned than their rivals to capitalize on the recent revival of LPs’ ability to make new fund commitments and to weather the future fund-raising droughts that will inevitably occur.

Read the full report: Global Private Equity Report 2014

Written by Hugh MacArthur, Graham Elton, Bill Halloran and Suvir Varma, leaders of Bain & Company’s Private Equity Group .

 
Update
10

6 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

Cambodia's Famous Battambang Circus
KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakyat was told today. ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

6 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

Splendour In the Grass 2014 - Byron Bay
KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken into by ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

6 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

Federal Aviation Administration Bans All US Flights To Israel
KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected b ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

6 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, D ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

INDIA-CHINA-DIPLOMACY-TRADE
PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in the southern states last mont ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

Government Weekly Cabinet Meeting
KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 million in compensa ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk Seri Mustapa Moham ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

Iskandar Johor Open - Previews
JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an allocation of RM20 million. ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

7 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

EurAsia Cup presented by DRB-HICOM - Day One
PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar Scheme 201 ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

7 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 bill ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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