Fund restructuring opportunities are on the rise, according to Suchita Nayar, head of alternative investments in North America at interdealer broker Tullett Prebon.
“Fund restructurings have been a particularly active area for us and we expect this trend to continue in 2015,” Nayar said, adding the firm has been particularly active during the past 15 months.
An increasing number of general partners in the fundraising market want to give options to existing limited partners stuck in older vintage funds. These LPs may be more willing to re-up to the new fund if they can exit older vehicles.
“As managers seek to capitalise on this healthier marketing environment by raising new funds, it helps their sales pitch to offer these solutions,” Nayar explained.
In addition, the incoming buyer of the older fund may be willing to staple themselves and become an anchor LP in the new fund. Nayar said this strengthens a manager’s marketing drive for the new vehicle.
Fund restructurings seem most prevalent with niche firms smaller than $1 billion in assets under management, with legacy funds of early 2000s vintages, Nayar explained.
“Still, the success of restructuring processes depend on the ability of the manager and the intermediary to manage buyer and seller pricing expectations, she said. “The buyer may negotiate more favourable terms, but we’ve seen this work well for all parties.