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The Deal's John Morris moderated Friday's opening panel "Limited Partners" at Columbia Business School's 14th Annual Private Equity and Venture Capital Conference. The panel looked at the challenges that limited partners face in the current private equity landscape. With tight credit markets cramping LBO dealflow, the limited partners that fund private equity vehicles are feeling the squeeze.
"Distributions have slowed, as have the capital calls," said Gerry Flintoft of Lacera, Institutional Limited Partners Association. "We participate on the large end of the market, and things have been quiet there." Although Limited Partners might not be entirely pleased with the recent developments in the LBO world, Sue Toigo, the chairman of Fitzgibbon Toigo Associates, said that "the pension funds still have to believe in private equity because it's a very important driver to their returns." With slower credit markets cramping LBO dealflow, Toigo predicted that "the smaller, nimbler funds are going to do a lot better, because they can get the deals done." HarbourVest Partners managing director John Morris commented, "We've seen a slowdown since last summer; there are segments that are still activity; it's mostly at the lower-end, and there is some activity as you creep up." But with transactions that are above a billion, it starts to get far and few, he continued. "The market above $2 billion is completely shut, [leading] some buyout groups to look for new areas to invest in such as Eastern Europe or to do deals without debt.""A lot of money was raised by giant funds, and they might want to move [downstream in order to do deals]," added David Conrod, head of Guggenheim Capital's Private Fund Group. "But that's going to be difficult for some of them." "The deals that get done this year and next probably may be homeruns for managers, because dislocations create opportunity," said HarbourVest's Morris, "but there's the fear that we're nowhere near the bottom, so let's sit on the sideline." And a dearth of deals is a concern for limited partners. "We've been an investor in the name-brand funds and gotten great returns from them," Morris continued. "But when you see a $20 billion fund and the debt markets closed, there is a concern that management fees will erode returns if they don't put money to work in the first few years."Conrod also mentioned that "some of the statements from GP are including fees for broken deals -- those aren't offset like the management fees, and things like that are a concern to LPs." - George White See earlier Dealscape: Columbia PE & VC Conference: Africa could be home to more investment See Columbia Business School PE & VC Conference schedule CategoriesPrivate capital video
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