Having Skin in the Game Isn’t So Easy Anymore for Private Equity Managers

The private equity industry has been raising record amounts of cash from investors. Now it’s the general partners’ turn to pony up.

General partners are expected to personally invest an average of $55 million in their next funds as they attempt to keep up with increasing fund sizes, according to results of Investec’s 2018-2019 GP trend survey.

This is an absolute increase from past years, due to the larger fund sizes as well as limited partner demands for GPs to invest more money alongside them. Investec’s forecast of a $55 million average commitment is based on Preqin data showing that GPs are targeting an average fund size of $1.9 billion.

The need to finance these GP stakes has fueled businesses such as Neuberger Berman’s Dyal and Goldman Sachs’ Petershill, which buy stakes in alternatives firms.

据基金咨询公司Triago董事长安托万•德兰（Antoine Drean）称，在金融危机之后，基金经理是否“参与了这场游戏”，成为许多投资者的“破发问题”。

“Indeed, many LPs see it as the essential counterpart to carry,” he said. “The assumption of these investors is that the best protection against losses, particularly in difficult markets, is making sure a fund manager has enough invested in a fund so that a loss hurts.”

Drean explained that many LPs look at a fund manager’s previous fund and how much was pulled out in carry to determine what might qualify as a meaningful amount for the manager to invest in the next fund. In general, he said the expected amount has risen from about 1 percent of capital before 2008 to 3 percent or more now.

“The GP team in the latest Brookfield infrastructure fund is actually planning to commit 30 percent of the capital raised,” Drean noted. Brookfield Asset Management said it would invest about $3 billion of its fundraising target of approximately $9 billion.

这项调查包括了289名全球私募股权专业人士的回答，结果发现，全球私募股权投资公司平均预期为其下一只基金投入2.9%的资金。这比去年的3.3%有所下降，尽管由于基金规模扩大，经理人的绝对承诺有所增加。

[IIDeep Dive:Private Equity Firms Aim to Raise More Cash This Year Even as Margins Shrink]

天达报告说，全球定位系统的承诺将继续上升。在天达的调查中，55%的受访者表示，他们的下一只基金规模将比上一只基金大25%，12%的人预计他们的下一只基金规模将是前一只基金的两倍。

新普通合伙人especially, funding personal commitments can be tough. Thirteen percent of GPs in the Investec survey said they didn’t know how they would finance commitments to the next fund, up five percentage points from a year ago. Among the private equity professionals who were not partners, 23 percent weren’t sure of fund commitment financing. However, 39 percent said they planned to reinvest carry or proceeds from co-investments. Fourteen percent said they would borrow money for commitments. (Investec, a banking and asset management firm, is a speciality finance provider for funds and fund management teams.)

The need to finance GP fund commitments is one of the top three reasons why private equity firms sell stakes to fund-of-fund-stakes like Neuberger Berman’s Dyal Capital or Goldman Sachs’ Petershill, according to a senior official familiar with the industry.

这位官员说，当全球定位系统出售股权时，收益通常会投资回企业，为普通合伙人的承诺或其他战略活动提供资金。

According to Drean, it has become increasingly common for GP teams to fund their entire commitment by selling a stake in the firm to managers like Dyal Capital and Petershill. “The need to have major skin in the game is generating good business for these funds and similar ones,” he said.

根据天达提供给亚博赞助欧冠, the average commitment for North American general partners – excluding the highest 10 percent and lowest 10 percent of responses – was 2.8 percent. North American respondents were the most likely to say that they didn’t know how they would personally fund their commitment, with 19.6 percent unsure of financing.

调查的全部受访者中有55人来自北美。

“Financing, particularly for newly independent managers or new partners and those junior to them, can be challenging, but that’s what LPs want,” Drean said. “This can lead newly independent managers and the more junior members of a team to take out significant loans.”