On the latest episode of Behind the Buyouts, Jeremy Knox, senior investment director of private equity at Schroders Capital, discussed the evolving relationship between limited partners and general partners amid a tighter fundraising environment, as well as the symbiotic relationship between the firm’s investment strategies that span the full spectrum of the M&A landscape.

LPs are paying closer attention to distributions to paid-in-capital ratios, or DPIs, of private equity funds as the pendulum of power shifts back to LPs following a record fundraising year in 2021. The change has spawned more continuation vehicles and a growth in net asset value, or NAV, loans as firms extend their holds in a tough exit market.

“What has certainly been the soup du jour over the last probably 12 to 24 months has been DPI,” Knox said. “And I think that has evolved some GPs’ thinking on how they manage their own companies and their own funds.”

Schroders Capital, the private markets investment division of London-based asset manager Schroders plc, manages around $99.3 billion in assets. The private equity arm of Schroders Capital manages about $25 billion in assets and typically invests in venture capital funds focused on early-stage companies and middle market and lower middle market private equity funds under $2 billion in size. The firm also directly invests in M&A transactions that are usually under $750 million in enterprise value as a co-investor as well as in continuation vehicles.

“There’s very much a flywheel effect across our platform in terms of the fund investing leading to co-investment opportunities, that then leads to sometimes secondary opportunities,” Knox said.

As a co-investor, Schroders Capital tends to back asset-light services businesses driven by nondiscretionary demand. These companies also tend to have local business models that are fairly insulated from tariff noise, according to Knox. The firm, for instance, has invested in heating, ventilation and air conditioning and foundation repair in residential and facilities services.

Check out the podcast with Jeremy Knox below:

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