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LP liquidity concerns have evaporated – Campbell Lutyens

The proportion of respondents who are 'not concerned' about liquidity was 81% across the summer, compared with 46% in the spring, according to a survey by the advisory firm.

Limited partners’ liquidity fears have subsided in recent months, a survey by Campbell Lutyens has found.

The proportion of respondents who are ‘not concerned’ about liquidity was 81 percent in the period May-August compared with 46 percent in March-April, the advisory firm and placement agent found in its latest LP Sentiment Update.

The proportion who said it was ‘too soon to tell’ dropped by 15 percentage points to 2 percent, suggesting most LPs believe the worst of the uncertainty may have passed.

“If we go back to March, everyone pulled out the playbook from the GFC [global financial crisis], which assumed the healthcare crisis was going to turn into a liquidity crisis very fast – that didn’t happen,” said Richard Hope, head of EMEA at Hamilton Lane.

The number of ‘already constrained’ LPs rose by 1 percentage point. Campbell Lutyens did not reply to a question about whether these LPs shared particular characteristics.

The change in LP mindset is mirrored by the investment committees of secondaries buyers. In March, 46 percent of the 17 buyers polled said they were ‘very cautious’ about the market, with 27 percent adopting an ‘active’ stance. In August, these figures were 29 percent and 59 percent, respectively.

Drivers of the change in buyer attitudes include the large volumes of dry powder putting pressure on buyers to deploy; the pricing spread narrowing as a result of stronger-than-expected second-quarter valuations, and the rally in public markets.