More LPs are seeking independent legal advice..
Increasingly, I am instructed by LPs seeking their own Cayman legal counsel prior to committing capital. It has always been a mystery to me why investors are willing to rely on the GP's Cayman counsel when committing significant capital to a new fund. As an attorney who advises both GPs on fund formation and LPs on fund investment, watching an open debate at a recent conference between various different LPs and GPs made very real the day-to-day negotiations on which I advise. The relationship between GP and LP is delicate, particularly in the early stages when the parties may be new to each other. It requires a balancing act and a careful negotiation; sitting on opposite sides of the negotiating table, depending on my instruction, keeps me on my toes.
Investor choice and its impact at the negotiating table...
2017 was a record year for capital put to work and distributions back to investors, generating a cycle whereby investors have more money to invest back in the industry. It is a time in which fund sizes are getting larger with (especially in Europe) no trend of capping fund sizes; it is also a time when many managers are back in the market with their next fund in just two years. Consequently, investors have more choice than ever, and they know it, making them extremely disciplined and selective; LPs note that they continue to diligence past returns (which, generally, have been coming down) with particular care. As such, the feeling among some GPs is that whilst it is certainly a good time for GPs to raise money in private markets, it is not always an easy ride getting commitments.
There is a new and increasing sense of support amongst women in PE...
What really stood out to me, after a packed 48 hours with 300 other women in the private equity industry at the recent Kayo Women's Private Equity Conference in Chicago, is how incredibly inspirational, how powerful and how motivational it is to simply hear the stories of women who have risen to the top of the industry.
Amongst others, we heard from speakers including Sally Pofcher, the operating partner at L Catterton, and Ann Fox, President and CEO of listed oil and gas company Nine Energy Service. It made me realise how powerful is this wave of open-ness amongst women in the industry; there is a real sense of support and of willingness, even eagerness, to help one another. I left feeling excited, energized but also responsible, realising how important this sort of peer engagement is not only for women in the industry and those of a younger generation with aspirations to join it, but for the industry as a whole.
I am proud that 'women helping women' is something we already see in the funds industry in Cayman, particularly through 100 Women in Finance, but I do have a sense that we can always do more; I am looking forward to doing my part over the coming months and years.
The next hot topics will be...
We are seeing huge changes and opportunity emanating from digtization, fintech, crypto and digital assets; but the fundamentals are also changing at a fast rate – we are dealing with an evolving investor base, as well as the impact of legal and regulatory change on the industry. I have spent considerable time this year speculating with fellow conference panellists about what funds and managers of the future may look like in terms of everything from structure to strategy and objective. But for those trying to predict the future, as they consider taking the plunge with a start-up or a spin-off, the best advice I have heard from those that have recently done exactly that is to focus on the fundamentals: taking your time, doing your diligence, evidencing your track record and surrounding yourself with a strong team.
Signs remain positive for downstream activity...
Valuations remain high; this was a recurrent theme on the conference circuit. But there is also a more positive message regarding a robust M&A market. In particular, venture backed IPO volumes have picked up over the course of the year. It seems likely we may continue to see a trend of venture backed companies being bought up by PE funds as 'growth' assets. The increase in downstream activity is what makes my job particularly rewarding, seeing a fund through formation and then helping it put capital to work is exciting. I think I can be justifiably hopeful that deal volume growth is set to continue with increasing momentum in 2019.
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