By David G.
Barry
Limited
Partners are certainly thinking differently about private markets than they
were a year ago.
That’s the
takeaway from a survey of more than 100 LPs during the first half of the year
by Rede Partners, a private equity fundraising advisory firm. European
LPs accounted for 43% of the respondents.
Facing inflation, supply chain issues and a possible recession, LPs are showing
a far greater interest in distressed/turnaround strategies and private credit
than they did during the second half of 2021 while showing far less interest in
growth equity.
Asked which asset classes they planned to increase allocations to in 2022, the
LPs surveyed identified lower midmarket buyouts, midmarket buyouts and growth
equity as their top three choices. However, all those sectors declined from the
prior period, led by growth equity, which fell by 20%.
On the flip side, distressed rose 15% to 20% and private credit rose 8%, also
to 20%.
Other findings from the ninth edition of the Rede Liquidity Index include:
·
That many LPs are reducing the capital they are
planning to commit to managers with whom they don’t currently have a
relationship. The survey said 36% of LPs fell into that category.
·
That more than 50% of LPs surveyed expected a
decrease in the volume of distributions they’ll receive from managers over the
next 12 months.
·
That healthcare is more attractive to
institutional investors than technology. According to the survey, 41% said they
plan to expand deployment to healthcare funds as opposed to 33% for tech.
·
North America is the region for which LPs have
the greatest appetite. Meanwhile, they indicated they are pulling back from
Asia and other emerging markets.