Recherche et études

In this survey, which to the best of our knowledge, is the largest of its kind ever undertaken, we attempted to distil the core functions of an LP into 10 distinct competency areas. We then provided three possible responses of ascending proficiency.
The report canvases the opinions of 179 limited partners ranging from high net worth individuals to major pension plans and finds that LPs exhibit the highest proficiency levels in areas of private equity allocation and return metrics. At the same time, the competency areas that still have the most room for improvement in performance are negotiation, reporting and position monitoring.

To see the relationship between LPs proficiency levels across various competency areas and the type of LP institutions, their geographical location and size of PE assets under management, take a look at our findings in the report.

A detailed analysis of venture capital funds globally shows that Chinese funds of vintage years 1997-2018 have delivered returns of 1.79x (total value to paid-in), comparing favourably with US funds on 1.70x and and Western European vehicles on 1.75x.
In addition, the research shows that Chinese funds take longer to reach maturity and have demonstrated longer hold periods for investments. In terms of time to liquidity, Chinese funds average close to 5.5 years, while US and Western European funds have a time to liquidity of under 5 years. The same is true for the global average.

This paper investigates whether the introduction of “fair value” rule affected the volatility of valuations in the private markets. We have analysed the impact of two major crises on private equity portfolios: 2001-2003, prior to the implementation of the rule, and 2007-2009, which happened simultaneously to the introduction of the fair value method.

“Despite a drop in performance from the record high achieved in 2017, returns from venture capital funds globally have remained strong (above 1.4x of TVPI) over recent quarters. This, combined with a sharp reduction in the level of risk that returned it to pre-2013 level, presents investors with a real opportunity to generate attractive risk-adjusted returns from the asset class. Western Europe in particular looks very strong, and could see convergence with US performance should it be able to maintain the returns of recent vintages.

Companies now are held on average 2.87 years – below the long-term average of 3.27 years and a duration not seen since 2011. Two reasons could explain this evolution: the sharp decrease can be triggered by exits, but also an increase in recent investment activity.”

Fund investors exercise a certain pressure on fund managers to quickly deploy the capital committed to funds. The rationale is that if they do, the performance drag from idle cash will be reduced. Under pressure, fund managers might have less freedom to select the best opportunities over time.

The evidence shows that managers of US LBO funds of vintage years (VY) 2000 to 2010 have been deploying more capital in the first year (29%) than during each of the following ones. Years 2 and 3 are roughly at par (20%) and amounts decline after that rather regularly and rapidly.

This survey shows that the median LP receives a standardized reporting template from more than half of its GPs.
LPs with larger assets under management are more likely to receive standardized templates (which tend to be more detailed). This seems to reflect the stronger negotiating position of LPs with larger financial resources, in making data requests.
Better performing GPs submit Reporting Templates in addition to proprietary Quarterly Reports relatively more often. They may be happier to provide granular detail on their financial performance and may also be keener to allow LPs to more easily compare their performance with their peers.

Multiple theoretical factors are cited in support of private equity secondaries investments, but chief among them is often the shorter time to liquidity delivered by the asset class, as a result of the investments being made in mature portfolios. However, since 2013, an unprecedented shift has taken place in the relationship between capital calls and distributions, meaning this may no longer be the case.

A few exceptional years have marked a decade and an asset class. The venture capital boom years of the decade 1990 have left investors with the wish to see them happen again. The analysis of that decade has shown that indeed it was unusual, not because of overall high TVPIs but mostly due to shorter time-to-liquidity. The 1990s recorded an average time-to-liquidity for US early-stage VC funds of 3.62 years, compared with 6.7 years for 2001-2010.