Regulation is the least sexy part of private equity but it is top of mind this year, as GPs face uncertainty about the burden of compliance, according to Grant Thornton’s latest survey of General Partners (GPs) as summarized in its Global Private Equity Report for the year. Dealflow, particularly heated competition for deals, and fundraising challenges are also seen as key trends this year.
The study found that fundraising has seen a “marked improvement” in sentiment across all geographies since last year’s survey. It has particularly improved for North America; where the percentage of respondents stating that fundraising environment is positive more than doubled, up from 20% to 45%. However, the challenge remains for fundraising in terms of cost and time required to raise a fund. New trends in fundraising include a tougher due diligence process with potential investors asking for more information than before, plus forward pipeline visibility, portfolio visits, and dataroom strategies. More GPs than ever (22%) expect their funds to be dominated by new LP relationships, in other words, churn is becoming more common for each new fund a GP raises.
The economic environment remains one of the top five challenges facing the PE industry, but optimism is higher, especially in the core private equity markets of North America and Western Europe. In North America, 58% of respondents expect an increase in activity, and 72% feel positive or very positive about the outlook for their own portfolio (compared to 61% globally). (Image source: Grant Thornton)