HNi Private equity Record net distributions

HNI's Share In Private Equity Fund Raising Hits Record 10%

High Net Worth Individuals‘ (HNI) share in the fund raising market stands at double digits for the first time, notes Triago.

Despite worries about global growth and the end of QE3, private equity’s performance reassures investors.

Private equity fund raising: Momentous evolution

In its quarterly report, Triago highlights that investors with over $1 million account for 10% of private equity capital raised in 2014’s first 10 months, surpassing the 6% clocked in 2008. The report notes this momentous evolution comes at a time when institutional investor demand for separate accounts and co-investment is eating into general partner profit margins.

HNI Private equity fund raising

The report points out that a number of GPs now have well-oiled partnerships with leading brokerages, with one major GP raising 18% of annual capital this way. The Triago report notes brokerage-sponsored campaigns that use low-fee feeders funds are gearing up to target retail investors, promising greater market share for individuals.

Citing a recent McKinsey & Company’s study, the Triago report notes in 2002, before a mid-decade period of exponential growth in assets under management, over 40% of PE managers who had achieved top-quartile status with a fund were able to repeat that showing with their next offering. This period was marked by less than 4% of top-quartile funds followed by a successor in the bottom-quartile. However, the Triago report highlights that today only about 20% of the best managers have two top-quartile funds in a row, and 30% are one-hit wonders, following up with bottom-quartile performers. Such a weakening of persistence and record liquidity forces investors to take a closer look at first-time managers.

Reasonable debt levels

The Triago also report points out that the average debt multiple in private equity deals now stands at 6.23 times the cash flow of acquired companies in the third quarter, which is the same level achieved in the 2007’s overheated credit market. However, the report highlights that today’s interest coverage ratio is nearly double what it was in 2007 and close to historic highs. Aided by low interest rates and covenant-lite terms, credit is flowing freely now. However, the report emphasizes that there’s no evidence that general partners are, on average, overburdening companies with debt.

The report also points out that annual distributions have already set a new record at $359 billion.

HNi Private equity Record net distributions

Touching upon the complexity of reinvesting, the Triago report points out that the challenge of investing exceptional capital is fostering new forms of co-operation between limited partners and general partners and even creative efforts to pool resources among LPs.


Saved Articles

The Life and Career of Charlie Munger

Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

  • Learn from the best and forever change your investing perspective
  • One incredible tidbit of knowledge after another in the page-turning masterpiece of a book
  • Discover the secrets to Charlie’s success and how to apply it to your investing
Never Miss A Story!
Subscribe to ValueWalk Newsletter. We respect your privacy.

Are you an intelligent investor?

ValueWalkPremium is a website and newsletter for smart investors like yourself. We focus on the latest hedge fund industry news much of which is not in the public domain and obtained via our sources.

We also have 10 years of resources on how to use this information to better your investment process.

Sign up for  today for only a few dollars a day and get a 3 day no obligation trial with a targeted 20% discount coupon code.

Cancel anytime during trial and you are never charged.

Limited time offer: For first 50 subscribers