Perhaps the most salient aspect of the most popular fundraisings listed in Palico’s private equity marketplace is that there isn’t a plain vanilla buyout fund among them. In an increasingly crowded private equity market, characterized by historically high pricing, investors in primary fundraisings are favoring specialists, whether they’re brand name or not.
|Contrarian is “In” at Palico|
Apollo Natural Resources II is the most viewed fundraising over the last three months by Palico’s 1,500 accredited investor members. Its popularity demonstrates the value of a strong distressed investing brand in a battered part of the private equity market. Amid exceptionally low oil prices and a surge in corporate failures among energy companies, fundraising has been falling for traditional oil & gas private equity funds. Yet Apollo’s energy fund raised a whopping $2.8 billion of its $3 billion target by early August. Its relative popularity is likely due to Apollo Global Management’s reputation as a specialist in turnaround situations. The second most popular fund in Palico’s marketplace, Fund C1 – Africa Special Opportunities, is also a standout, given much slower economic growth in Africa this year, and a corresponding drop off in private equity fundraising. Investors who favor Africa gravitate to the continent’s relatively attractive pricing and favorable long-term economic forecasts. Africa is also still seen by many as a fairly uncrowded private equity market.
|Secondaries Funds Come into Their Own|
In a market where high prices for assets mean it often takes managers longer than it once did to add value, specialists in secondary investing have proven increasingly popular. Purchasing mature private equity fund stakes typically returns investor money in roughly three years, as opposed to 10 years or more for primary investments. The third most popular fundraising in Palico’s marketplace is the $100 million Saints Ventures II, a specialist in the restructuring of entire funds – often called “direct secondaries.” The seventh most popular fundraising is for the $4.7 billion Landmark Equity Partners XVI. The vehicle’s manager Landmark Partners, has built one of the strongest brands in the secondary market.
|Strategies that Get Investor’s Their Money Back Quickly Have Traction|
Other strategies that provide a shorter waiting period for payouts, or a regular yield, are also increasingly popular. Two examples of funds that do this in relatively uncrowded corners of the private equity market are the 5th most popular fundraising, Xterra Property Development, and 6th ranked Energy Transition Opportunity III. The former specializes in real estate in the Middle East and Africa, while the latter invests in renewable energy infrastructure, mainly in the U.S.
|The Appeal of Growth and Niche Investing that Doesn’t Rely on Debt|
The one fundraising among Palico’s current crop of top ten vehicles designed to target debt-backed buyouts, the €2 billion Vitruvian Investment Partnership III, which rounds out our list, is really a hybrid, since its managers look for a combination of European buyout and growth investments. The remaining balance of top ten fundraisings in Palico’s marketplace consists of one generalist U.S. growth fund, fourth ranked Harbor Island Growth II, and two niche operators: Karin Capital Fund, an Asia-Pacific venture capital fund-of-funds, targeting $100 million and Europe-focused Apposite Healthcare II, aiming for £125 million. Today, most private equity investors believe building value stems from operational expertise and an ability to exploit uncrowded markets; not on financial engineering.
|Navigating Private Equity’s Growing Diversity|
As investors allocate rising amounts to PE, choice in fundraisings and secondaries is expanding. In an increasingly complex private equity universe, Palico’s online marketplace helps investors find the best funds and helps managers connect with the right investors. For both general partners and limited partners, Palico makes transacting easier.