The article found below in the comments section examines what Limited Partners (LPs) seek from emerging General Partners (GPs) in private equity, particularly as fundraising challenges persist. Emerging managers face significant hurdles due to investors’ preference for large, established GPs in recent years. However, new GPs can improve their chances by focusing on four key areas: alignment, differentiation, track record, and strategy.
𝐊𝐞𝐲 𝐓𝐚𝐤𝐞𝐚𝐰𝐚𝐲𝐬:
𝐀𝐥𝐢𝐠𝐧𝐦𝐞𝐧𝐭 𝐨𝐟 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭𝐬:
LPs value GPs who invest significant personal capital into their funds, ensuring strong alignment. Emerging GPs, without the financial cushion of large management fees, often fulfill this preference.
𝐃𝐢𝐟𝐟𝐞𝐫𝐞𝐧𝐭𝐢𝐚𝐭𝐢𝐨𝐧:
LPs are drawn to unique and well-defined strategies, especially those emphasizing operational value creation. Popular sectors include industrials, healthcare, and software, while buyout strategies are preferred over others.
𝐓𝐫𝐚𝐜𝐤 𝐑𝐞𝐜𝐨𝐫𝐝:
A demonstrated track record is essential; many LPs require a minimum of three successful exits. Emerging managers face higher scrutiny, especially those launching first-time funds.
𝐂𝐡𝐚𝐥𝐥𝐞𝐧𝐠𝐞𝐬 𝐰𝐢𝐭𝐡 𝐋𝐏 𝐏𝐫𝐞𝐟𝐞𝐫𝐞𝐧𝐜𝐞𝐬:
Despite meeting these criteria, some LPs still favor larger, well-known firms for ease of internal approval. Emerging managers need to maintain strong investor relationships for future opportunities as fundraising conditions improve. The article concludes by highlighting the importance of networking and ongoing engagement between GPs and LPs
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