Last week I put up a post about Dan Primack's response to the 2011 Bain Global Private Equity Report. I agreed with Dan that firms are facing pressure from LPs to spend the last of their funds, which would in turn fuel "bad deals." However, I felt that this trend would not be seen amongst all private equity firm sizes, notably some mid-market and lower-mid-market shops.
Then today, courtesy of Stephanie McAlaine, Executive Director of ACG Philadelphia, I read a piece about how the public market turmoil could be a boon for the private equity industry. I agreed with the general opinion; the industry has diversified itself so well that it's becoming a safer play to look at fund-of-funds investments, and the fact that it will find ways to fight any sort of regulation (unless FINRA comes knocking, as David Snow pointed out in a Privcap post) will help it stay safely diversified.
However, one key statistic came to my attention:
According to Coller Capital Ltd., which tracks the industry, 60 percent of private equity investors, known as Limited Partners, or LPs, plan to increase their rate of new private equity commitments in 2011, and 34 percent intend to increase their target allocation to private equity, compared with 19 percent a year ago.
Now I know Dan's right that there still is pressure from LPs that private equity firms are facing to use up the cash, but now I'm more convinced (thanks to Coller) that LPs are going to end up being ok with transferring that remaining capital to the next fund/commitment contract. While I'd like to get more details from Coller about the statistic (is this for the overall industry, does it differ significantly when look at PE firms by size, etc.), it's a promising piece of information.
That, plus the fact that my contacts and clients haven't taken a break from deal-making after a VERY busy Q4 2010 (and therefore keeping me busy) helps.
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