Latest / Best of LinkedIn: Strategy, M&A & Investments / Best of LinkedIn: Private Equity: Fundraising CW 31/ 32

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Best of LinkedIn: Private Equity: Fundraising CW 31/ 32 · Best of LinkedIn: Strategy, M&A & Investments

• 0:00
  Speaker 1: provided by Thomas Allgaier and Frennus, based on the most relevant LinkedIn posts about private equity.
• 0:05
  Speaker 1: Fundraising insights in calendar weeks thirty-one and thirty two.
• 0:09
  Speaker 1: Frenna supports PE backed manufacturers with a market intelligence needed to unlock revenue from idle production capacity.
• 0:16
  Speaker 1: you can find more info in description.
• 0:18
  Speaker 1: so um set at this stage.
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  Speaker 1: here today we are doing deep dive into top private equity fundraising trends that just buzzing all over linkedin right now.
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  Speaker 1: We've clustered all this intel into three main themes for you.
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  Speaker 0: Yeah, Three themes just to help everybody cut through the noise really because it's a lot of noise out there For strategy and investment professionals.
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  Speaker 1: There is so much noise And You know To understand The landscape right now I think we have Look at the macro capital flow first Because they get This two point one trillion dollars in dry powder Just sitting there
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  Speaker 0: Right which sounds amazing Like A total gold rush
• 0:52
  Speaker 1: Exactly!
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  Speaker 1: anyone with a half decent pitch deck could just walk out and raise the fund right now.
• 0:58
  Speaker 0: But they can't, that's the crazy part!
• 0:59
  Speaker 0: The money hasn't disappeared obviously but its destination has shifted so radically.
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  Speaker 0: it's setting up this brutal sorting mechanism between the haves...and the have-nots.
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  Speaker 1: Yeah huge divide.
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  Speaker 1: Let us look at first theme here This whole flight to quality in a contracting market.
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  Speaker 1: Overall fundraising volume is shrinking Like, Charlotte Hogg shared some numbers recently that USPE fundraising was actually down nineteen percent in the first half of.
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  Speaker 0: John Stuart actually posted about this, noting how first-time fund closes have just dropped off the cliff.
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  Speaker 0: It's
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  Speaker 1: completely falling off?
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  Speaker 0: Oh!
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  Speaker 0: Completely because you know LPs are flocking to the mega cap brand names.
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  Speaker 0: Sid Jain shared a stat that blew my mind.
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  Speaker 0: The top ten PE buyout funds raised about one hundred and twenty nine billion dollars in each one.
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  Speaker 1: Just ten
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  Speaker 1: funds?!
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  Speaker 1: That
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  Speaker 0: is just ten.
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  Speaker 0: And KKRs North America Fund A eleven took twenty three billion of all by itself.
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  Speaker 1: That is insane.
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  Speaker 1: Just soaking up all the oxygen in the room.
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  Speaker 1: and it's not even just buyout mega funds, right?
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  Speaker 1: Alternative assets are seeing this exact same
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  Speaker 0: thing across the board.
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  Speaker 1: like Marcus Eggloff highlighted that KKR closed its largest infrastructure fund at nineteen point two billion.
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  Speaker 1: And Jimmy firstling was talking about starwood capital closing a ten point to billion dollar real estate Fund mainly targeting hospitality as a diversifier.
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  Speaker 0: Right.
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  Speaker 0: so it's this massive flight to proven giant managers.
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  Speaker 1: Yeah exactly.
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  Speaker 1: but um There are exceptions, aren't there?
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  Speaker 1: Like it's not totally impossible for others.
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  Speaker 0: No!
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  Speaker 0: It's non-impossible.
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  Speaker 0: Exceptional middle market and debut funds are still winning but they have to be absolutely stellar.
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  Speaker 0: Elliot T. Freedman pointed out Francisco Partners closing twenty one billion across their flagship and middle market fund.
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  Speaker 1: Okay so a huge win there
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  Speaker 0: Huge.
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  Speaker 0: And for debut funds.
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  Speaker 0: if you highly differentiated edge You can still break records.
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  Speaker 0: Liddy B. Hudson and Leonardo Rosas both talked about Citation Capital hitting a one point.
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  Speaker 0: two billion dollar hard cap.
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  Speaker 1: Wait
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  Speaker 1: really?!
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  Speaker 1: A billion plus for a debut fund.
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  Speaker 0: Yeah, which is actually record in Texas.
• 3:14
  Speaker 0: so it happens.
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  Speaker 0: Okay
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  Speaker 1: I have to push back on the overarching narrative here though Because you hear all these GPs basically crying about high interest rates saying oh the macro environment right now.
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  Speaker 1: Are they just using that as an excuse?
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  Speaker 0: Well,
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  Speaker 1: I mean... Because Chris Febele made this amazing point.
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  Speaker 1: He said the industry happily spent the last four decades claiming that the upside from falling interest rates was pure skill like look how smart we are.
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  Speaker 1: but now They blame the Fed for the downside.
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  Speaker 1: So aren't the GPs who were outperforming today Just the ones Who actually know How to build value instead of relying on financial engineering?
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  Speaker 0: Yeah i think Sebele's Point is totally spot-on.
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  Speaker 0: The era Of cheap money Is over.
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  Speaker 0: If you can't build actual operational value, You're gonna get found out real quick in this market.
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  Speaker 1: Which brings us perfectly to our second theme honestly Do diligence?
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  Speaker 1: LPGP trust and how AI is completely flipping the script.
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  Speaker 0: Yeah This where it gets really wild.
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  Speaker 0: Because of capitals concentrating into fewer hands LPs are obviously evaluating these managers a lot more closely.
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  Speaker 1: Right The old playbook.
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  Speaker 1: You can't just slide a glossy pitch deck across the mahogany table anymore.
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  Speaker 0: Well, definitely not.
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  Speaker 0: and you know The first impression isn't even human any more.
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  Speaker 0: David Weisberg shared this research showing that ninety six percent of institutional allocators Run AI screens on a GP before they even take a meeting.
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  Speaker 0: Ninety-six
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  Speaker 1: percent That's almost everybody.
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  Speaker 0: It is, everybody.
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  Speaker 0: And the AI isn't just reading your nicely formatted deck it's that they're scraping the media building a profile.
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  Speaker 0: They found that LPs actually rank The reputation of the CEO and the firm above the stated returns
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  Speaker 1: Above the returns?
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  Speaker 1: Wow So you digital footprint matters more than your IRR spreadsheet Exactly.
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  Speaker 1: But it goes beyond Just the AI screen.
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  Speaker 1: right because James Neal noted That GPs are literally commissioning independent fundraising.
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  Speaker 1: due diligence on themselves.
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  Speaker 1: now
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  Speaker 0: Yeah...they have to
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  Speaker 1: Like their bringing in portfolio company, CEOs board members existing LPs to basically validate their track record.
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  Speaker 1: To new investors because all peas want to know how the sausage was made.
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  Speaker 1: not just that it tastes good
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  Speaker 0: right.
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  Speaker 0: they wanna know The exact mechanics of those returns.
• 5:23
  Speaker 0: by the way quick side note if you Want to keep getting these curated insights without the fluff make sure You hit subscribe so you catch our future deep dives.
• 5:30
  Speaker 0: yes
• 5:31
  Speaker 1: Definitely hit subscribe.
• 5:32
  Speaker 1: So back to this intense diligence, the frameworks are changing too.
• 5:35
  Speaker 0: Oh completely!
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  Speaker 0: Philip Kraft brought up this fascinating new three-step approach by Organica.
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  Speaker 0: They actually separate a GP's pitch into three distinct buckets for The Investment Committee.
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  Speaker 1: Okay what of the bucket?
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  Speaker 0: so first you have the audited financials just raw historical truth.
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  Speaker 0: Second, you have management's base case.
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  Speaker 0: Like the GP's optimistic view of future.
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  Speaker 0: and then third they layer on an entirely independent view.
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  Speaker 1: Ah!
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  Speaker 1: So that committee can actually see where the GPs narrative diverges from reality?
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  Speaker 0: Exactly it shows them exactly why their numbers should or shouldn't be trusted.
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  Speaker 1: That is brilliant.
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  Speaker 1: but you know GPs aren't just taking this AI revolution lying down.
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  Speaker 1: They are using it themselves.
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  Speaker 0: Oh yeah its arms race.
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  Speaker 1: Like going back to L.E.T Friedman's post about Francisco Partners, they went from marketing to a first close on that twenty one billion dollar raise in about three months
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  Speaker 0: which is insanely fast for this market.
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  Speaker 1: unheard of.
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  Speaker 1: and how did the do it?
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  Speaker 1: AI operating capabilities used if you're LP targeting And they automated their due diligence questionnaires The DDQs.
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  Speaker 0: DDQ takes months manually
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  Speaker 1: Right!
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  Speaker 1: They use AI to track record analysis instantly.
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  Speaker 0: It basically requirement now.
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  Speaker 1: So my question to you is, Is the modern fundraising environment just algorithmic dating for institutional capital at this point?
• 6:54
  Speaker 0: Huh.
• 6:54
  Speaker 0: Algorithmic Dating
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  Speaker 1: Seriously like your digital reputation score gets you past The AI screen.
• 6:59
  Speaker 1: That's a swipe right.
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  Speaker 1: but actually get married and Get the commitment.
• 7:03
  Speaker 1: You need character references And This airtight operational prenup.
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  Speaker 1: Like are we seeing the death of relationship based Fundraising?
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  Speaker 0: I wouldn't say that Death Of It.
• 7:12
  Speaker 0: But the Relationship has To Be backed by Verifiable data now.
• 7:16
  Speaker 0: You can't just be a good guy to golf with, the algorithm has to like you first and then independent auditors have.
• 7:44
  Speaker 1: LPs need cash back.
• 7:45
  Speaker 0: They are desperate for cash, and Lee McCabe pointed out why it hurts so much.
• 7:50
  Speaker 0: There's this ticking fee clock on uninvested capital an unsolved assets right
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  Speaker 1: holding three point seven trillion in dry powder.
• 7:56
  Speaker 1: sound safe But
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  Speaker 0: but it quietly erodes your net returns because of the ongoing management fees.
• 8:02
  Speaker 0: if The exits are stalled LP still pay fees.
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  Speaker 0: So they're turning to the secondaries market as a release valve
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  Speaker 1: And that market is just exploding to meet the demand.
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  Speaker 1: Maxine Kharmoniak highlighted that ClipWay just closed its debut secondary fund at a record six point four billion dollars.
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  Speaker 0: A debut fund, it's six-point-four billion!
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  Speaker 0: Let that sink in...
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  Speaker 1: It's staggering and Tom Callahan mentioned NPM is actually acquiring NASDAQ funds secondaries business.
• 8:29
  Speaker 1: they want to combine direct share and multi asset fund stake trading on one single platform Just to enhance liquidity access for everybody which
• 8:39
  Speaker 0: is sorely needed.
• 8:40
  Speaker 0: But there is a really fascinating bottleneck here that Mustafa Siddiqui pointed out.
• 8:45
  Speaker 0: Oh,
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  Speaker 1: but the supply and demand impalance?
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  Speaker 0: Yeah!
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  Speaker 0: So despite record high deal volumes in secondaries The actual dry powder raised for secondarys falling.
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  Speaker 1: Wait how does it work if market is booming?
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  Speaker 0: Because the bulk of buying capacity sits with just a few mega buyers at the very top.
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  Speaker 0: It leaves the entire middle market vastly undercapitalized, there is not enough secondary capital to buy out all the middle-market LPs who want liquidity.
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  Speaker 1: buying the age of a bottle that someone else already stored and de-risked for you.
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  Speaker 0: It's a perfect analogy.
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  Speaker 1: But if secondaries are the aged wine, what about all these structured capital solutions?
• 9:35
  Speaker 1: Like our GP is just creating these to avoid selling assets at a discount.
• 9:40
  Speaker 0: Oh absolutely They don't want to sell a good company in a bad market so they are looking for alternative liquidity.
• 9:46
  Speaker 0: Matt Kerfoot noted that Proskauer advised on four billion dollars of preferred equity fund financings In just six months.
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  Speaker 1: So they're taking unstructured debt at the fund level to pay out LPs.
• 9:58
  Speaker 0: Exactly, and Michael Hacker discussed AlpInvest closing its Adam II Fund which is a single asset continuation vehicle.
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  Speaker 1: Right The CVs Move the best asset into a new fund, let old LPs cash out or roll over.
• 10:12
  Speaker 0: Yeah it buys the GP more time to grow the assets without holding original LP's hostage.
• 10:17
  Speaker 0: Furthermore we are seeing this surge in GP states.
• 10:20
  Speaker 0: have you seen numbers on that?
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  Speaker 1: It is wild turned into one hundred billion dollar asset class.
• 10:25
  Speaker 0: Exactly!
• 10:26
  Speaker 0: Muir Irfan Ali and Philip DeVuser both talked about blue owl capital really leading here
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  Speaker 1: Right, where they literally just buy a minority stake in the private equity firm itself.
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  Speaker 1: They just by piece of the GP to give the founders liquidity.
• 10:41
  Speaker 1: Yeah
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  Speaker 0: it's structural evolution.
• 10:42
  Speaker 0: The market is inventing new plumbing To get liquidity moving again.
• 10:46
  Speaker 1: It really yes.
• 10:47
  Speaker 1: Okay.
• 10:47
  Speaker 1: so that actually brings me to final sort of provocative thought for you to chew on before we wrap up here.
• 10:52
  Speaker 0: Let us hear it.
• 10:54
  Speaker 1: So if traditional committed buyout funds are struggling with alignment Their fighting over valuations and they've got this ticking fee clock eroding returns.
• 11:05
  Speaker 1: Look at the rise of The Independent Sponsor.
• 11:07
  Speaker 1: Oh,
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  Speaker 0: this is a really interesting shift
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  Speaker 1: right?
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  Speaker 1: John Kapl and Peter Martinson shared some data on This?
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  Speaker 1: The independent sponsor model where you actually find the deal first And then you raise the capital second Is generating a median twenty three point eight percent IRR
• 11:21
  Speaker 0: which is huge.
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  Speaker 0: That's
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  Speaker 1: five point three percentage points above comparable buyout funds.
• 11:25
  Speaker 1: Wow
• 11:26
  Speaker 0: because there is no ticking fee clock
• 11:28
  Speaker 1: exactly driven by proprietary deal flow and the alignment is intense.
• 11:33
  Speaker 1: LPs only fund the exact deal they want.
• 11:36
  Speaker 1: It really begs the question, is the traditional committed fun model starting to look a little outdated?
• 11:50
  Speaker 1: Something to think about for sure.
• 11:51
  Speaker 1: Definitely!
• 11:52
  Speaker 1: If you enjoyed this episode, new episodes drop every two weeks.
• 11:55
  Speaker 1: Also check out our other editions on PE Value creation, PE Exit strategies venture capital M&A and strategy in consulting.
• 12:03
  Speaker 1: Thank You so much for joining us For This Deep Dive And remember To Subscribe So You Don't Miss The Next One.
• 12:08
  Speaker 1: Catch Ya Later.