Limited partners are generally happy with previous decisions they’ve made in restructuring situations, according to a survey by Coller Capital.
Almost 80 percent of LPs in funds that have been restructured by their GPs believe, with hindsight, that they generally made the right decision about whether to exit or remain invested, according to the secondaries firm’s Global Private Equity Barometer Winter 2016-17, which polled 110 private equity investors globally.
One in 20 said they made the wrong decision in most cases, while 17 percent said they made the right decision in some cases.
Fund restructurings are “a significant part of the secondar[ies] landscape,” Coller partner Stephen Ziff told Secondaries Investor.
“Fund restructurings are a continued evolution of how GPs are offering routes to liquidity for their investors,” he said.
“It’s partly recognising the fact that portfolio development lost anywhere between three and five years just by virtue of the financial crisis, and therefore GPs need that additional three-to-five-year period to maximise returns.”
According to research by Greenhill Cogent, there were more than 20 GP-led restructurings in the first half of 2016.
“Restructurings are complex and there are a number of competing themes and issues, not least of which is the role of the GP going forward, so it is important to recognise this and tackle the issues up front,” Ziff said.
Coller’s survey also found that almost half of LPs intend to buy assets on the secondaries market over the next two years, while 37 percent intend to sell assets.
A third of public pension plans and insurance companies predict their organisations will miss their overall investment target returns within the next three to five years, unless there is significant change in their economic environment or operating model, the survey found.
LPs are still confident that private equity can deliver: more than three quarters of LPs expect net annual returns of more than 11 percent over the next five years.
Source: Coller Capital