With the flood of money trying to get into a finite number of top-quartile private equity funds, institutional investors are scrambling to compete for access. When they do gain access, the limited partners in large LBO funds are having to pay the price with enormous management fees and lower returns expectations.
Private equity, as we know it, is changing, and the pension funds and endowments that invest in them face new types of challenges. In The Deal's Private Capital Symposium, April 23-24 at The Sheraton New York Hotel & Towers in New York City, "LPs and Their Expectations” is one panel discussion that will address some of these issues. Panelists — including leading pension funds and alternative asset managers — will also look at questions such as:
- The alternative asset class seems to be getting more and more diversified — it used to be just PE, VC and perhaps energy or real estate. In terms of allocations, what areas have limited partners been focusing on and tell us why?
- There’s a flood of money trying to get into private equity globally. But there’s a finite number of top-quartile performers in the industry. How are limited partners coping with the barriers to entry, or how difficult is it to get into the funds you want?
- The large LBO funds have become gargantuan, compared to just a few years ago, and so have fees. To what extent are limited partners able to negotiate the terms to their liking?
- Some of your general partners, like Fortress Investment Group LLC and Kohlberg Kravis & Roberts Co., have done the unthinkable by taking their firms public. These are groundbreaking developments in private equity, but are there concerns about potential conflicts in having two different classes of shareholders?
- Valuations are high, which means returns expectations are sinking. How are limited partners making adjustments in their investment portfolios to factor in these lowered expectations?
- We’ve had a good run of M&As, but sooner or later, the cycle will turn, and portfolio companies loaded with debt will go bust. How are limited partners cushioning their own investment portfolios from the impact? Portable alpha? Hedge funds? —Vyvyan Tenorio
See PC Symposium Web site
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