LP sentiment has waned significantly for maiden vehicles in recent years but that may change this year, according to the latest analysis of fundraising data from Preqin. Since 2011, the amount raised by first time fund managers has been on a steady year on year decline.
While the trend is a tad depressing, there are still some first-time funds that are able to reach a successful close, say the analysts. An example from 2014 YTD is SwanCap Investment Management which raised USD 1.2bn for its debut vehicle, SwanCap Opportunities Fund, a secondary buyout fund. The reluctance to invest by LPs stems from the risks associated with placing their money with a firm that does not have any track record of success in private equity fund management, says Preqin.
The analysts at Preqin seem optimistic about a change in LP sentiment this year, saying that there are still three-quarters of the year to go and 2014 “already seems to be painting a promising picture for first-time fundraising”, with much potential for last year’s figure of USD 35 billion. In other words, the downward trend may be bottoming out after hitting its peak year in 2007 when first-time private equity fund managers raised an aggregate USD 96 billion for investment. (Image source: Preqin)