Tuesday 16 November 2016 marked the first day of the main SuperInvestor conference in Amsterdam. Unsurprisingly, politics was high on this year’s agenda with President-elect Trump being the main focus in discussions. David Rubenstein, Co-Founder and Co-CEO of The Carlyle group, took the morning delegation through his keynote address covering the US election, how Donald Trump managed to secure victory against the odds (and polls), and the potential impact on the private equity industry going forwards. It’s clear that prospective views on the private equity industry are wide ranging and still highly subjective at this stage, and will be for some time until the impact of Brexit and the US Presidential election become clear.
David zoned in on one of Donald Trump’s campaign proposals which promised less regulation and delegates continue to speculate how (and if) this will be implemented. New policies and a new approach are on the horizon and the Dodd-Frank Act is one key piece of legislation that is expected to come under closer scrutiny as part of the new administration in the coming months and may lead to a lighter touch regulatory regime in the United States.
Dan Quale, 44th Vice President of the United States & Chairman, Cerberus Global Investments, picked up the baton where David Rubenstein left off - with Trump once again leading the discussions. Dan Quale raised many insightful topics and even indicated his support for the UK becoming part of a renegotiated North American Free Trade Agreement (NAFTA) - currently in place between Canada, the United States and Mexico. With Brexit on the horizon and uncertainty as to how 'hard' or 'soft' such exit may be (if indeed there is any exit at all given the recent High Court ruling), the UK may be motivated to strengthen its trade position where possible, and a renegotiated NAFTA agreement may present such an opportunity.
While today is the first day of the main conference, and politics is clearly high on the agenda, yesterday's Summit day took the chance to focus in on some key private equity topics, including both fundraising and secondaries.
On the fundraising side, we had the opportunity to gain useful insights into the general partner – limited partner relationship and see how limited partners are able to secure an interest into funds, particularly those that have been able to generate scarcity and are oversubscribed. In those instances where general partners have the luxury and ability to select its investor base, geographical diversity and a broad range of investor types is important. Beyond that though, it's the attention to detail that really makes a difference for general partners and can help secure that coveted allocation and access for a limited partner into a fund. Johanna Barr, Managing Director & Global Co-Head of Limited Partner Services at Advent International gave us her insight into the things limited partners could and should be doing. The allocation process isn’t a science and nor is it only determined simply by spreadsheets or data. We work in a people business and often, the final decision can come down to people and those individuals that made the right impression. For example, demonstrating a keenness to build relationships, undertaking detailed due diligence and challenging the deal teams in the right way can help a limited partner curry favour. Johanna went on to say that generally being nice throughout the process doesn’t harm a limited partners chances either.
On the secondaries side, reports indicate that a relatively nascent form of liquidity offered by general partners, general partner-led restructurings, continues its upward trajectory within the industry, currently taking up approximately 25% of the market space and anticipated to reach 33% by next year. General-partner led restructurings are a form of liquidity gaining traction in the market despite the deals themselves being complex and difficult to execute. The obstacles faced in these transactions may be a contributing factor as to why some investors remain wary of committing resources to these deals despite evidence demonstrating that expected returns are higher. With the amount of dry power in the secondaries sector at an all time high, as limited partners continue to increase allocations and resources to this strategy, competition for deals also remains high.