After an abysmal year in the fund raising and exit markets, the private equity industry is becoming more optimistic about its future, according to the latest research from Investec Private Equity Fund and Partner Finance.
The findings from Investec revealed that 83% of GPs expect to receive carried interest from current funds, which would contradict the expectations expressed by many LPs. Over three-quarters (79%) of GPs still believe that carried interest represents the main opportunity for personal future wealth creation, which Investec says indicates that the industry still has a hunger to deliver the returns sought by LPs.
In further optimism, over a third (37%) anticipate their next fund will be bigger than the current one and 80% expect the economy to improve over the next 12 months. The top priority for GPs is to ensure good management of existing portfolio companies.
While many are positive about the future prospects of private equity, many are remaining cautious, with 43% expecting their next fund to be the same size and 6% believing their funds will be smaller. And fund raising will be affected next year, as one in ten of GPs interviewed said their firm would not be raising another fund.
Private equity partner and fund finance of Investec Private Bank, Simon Hamilton, said: “Our research suggests that the UK private equity industry is in a relatively upbeat mood despite challenging market conditions. LPs and employees of portfolio companies should find this research very encouraging since the professionals who manage the investments are both optimistic about the companies they have backed, and have prioritised the need to work with them closely over seeking out new opportunities.”