Approximately ten years ago, we witnessed an unprecedented period of fundraising as leviathan leveraged buyout funds gathered tens of billions in capital commitments. The immediate challenges that faced those funds, as markets collapsed in 2008 and leverage dried up, have been well documented. What is interesting now is that this generation of funds is coming to the end of their contractual terms, and are faced with the challenge of extracting as much value as possible from what remains of their burdened portfolios.

Within this context, during the past three years we have seen the re-emergence of fundraising for large institutions. Individual sizes are perhaps more modest than during the previous cycle, but there are also many more specialist funds in the marketplace, and the aggregate capital raised is impressive. There are many stark similarities between 2016 and 2008. The uncertainties may be more political than market-based, but they are two sides of the same coin. It is trite to say that with these uncertainties come opportunities that present themselves in no other time, but nonetheless true. For funds that are still relatively new, there is the chance to be nimble and to exploit these opportunities.

However, for funds at the end of an investment cycle, the uncertainties are less welcome. This is because one of the many unique factors about an investment in a private equity fund is that such funds are closed-ended and so, by definition, have an end point. Happily, there are sophisticated investors with recently filled war chests who are looking to exploit the availability of secondary investments in funds and their assets. That presents a rather unique set of challenges with which we anticipate the industry will be heavily occupied in the year ahead.

Originally published in The Mergers and Acquisitions Review, - Edition 11 (published in October 2017 – editor Mark Zerdin).

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