Country-specific infrastructure funds or funds with a “unique type of sourcing model” are likely to have success in the fundraising arena, while global-minded infrastructure funds will face more challenges, according to Richard Anthony and Dana Pawlicki, of Evercore’s Private Funds Group.
“I think you are going to end up having these niche funds that are going to be successful and a limited number of global funds,” Anthony, chief executive of Evercore’s Private Funds Group said, before adding: “I think unfortunately a lot of the first ones will struggle to raise.”
When it comes to bidding for assets, though, existing global funds are at an advantage, he said, given that they will likely be bidding on a limited number of infrastructure assets and probably have a better chance of winning those assets than first-time fund managers.
Anthony also said that some general partners (GPs) raising second funds “aren’t going to get forgiven” if their first fund struggled.
But Pawlicki, a managing director at Evercore’s Private Funds Group, was quick to point out that funds related to energy have seen a great deal of interest, particularly in relation to new opportunities for unregulated energy in the US.
Anthony and Pawlicki also pointed out that the first quarter of 2011 was “dismal” for private equity fundraising, showing some of the worst results since 2004. However, expectations are higher for the remainder of the year, as limited partners (LPs) wait for firms to invest their undeployed capital before making new commitments.
Anthony said he observed “growing optimism” about the private equity sector from LPs, but added that he saw LPs becoming “a lot more cynical, a lot more jaded”, and less inclined to believe GPs' pitches. To that end, Anthony said LPs are undertaking more due diligence on GPs and are becoming “incredibly granular” about the track records of GPs raising funds.
Pawlicki said the current market is “incredibly crowded”, citing a survey estimating that about 50 percent of existing private equity firms are going to be raising funds in 2011. Pawlicki said the sheer volume has left LPs feeling like “air traffic control landing planes on the runway”.
One “high point” in an otherwise disappointing fundraising period was that the average length of fundraising time decreased from about 24 months to 18 months, Pawlicki said.