PE Key Trends Blog

Palico in Focus - Where Anchor Investors Commit to First-Time PE Funds

Mar 1, 2017 2:55:17 PM

Tags: Palico In Focus, V2

Given the high percentage of first-time fundraisings on offer, it’s not surprising that anchor investors frequently find investments in Palico’s private equity marketplace. Some 40 percent of 320 investable fundraisings for classic primary vehicles on Palico (there’s an additional 101 secondary and co-investment opportunities) are first-time funds.

Anchor Investors are a Fundraising Catalyst

Anchor investors, more quaintly known as bell-cow investors, are leaders. Their substantial monetary pledges to fundraisings - often on the order of 20 percent of the targeted sum - demonstrate exceptional conviction, leading other investors to consider and commit capital to the private equity vehicles they back.

First-Time Managers Frequently Need Anchor Investors

While virtually all first-time fund managers have experience investing in their chosen strategy, the majority are part of new organizations. Because they can’t look for re-ups from an existing investor base, they frequently have an especially challenging time raising capital. This makes them open to the fundraising edge offered by anchor investors, even though the advantage often comes with a price for general partners - preferential investment terms.

The Appeal of Anchor Investing for Limited Partners

In exchange for helping put managers in business with a substantial commitment, anchor investors receive advantages ranging from discounts on annual fees, reductions in the capital gains reserved for managers (known as carry), broader co-investment rights than those offered other limited partners, and sometimes stakes in the general partner’s management company, and thus a share in carry. Anchor investors may also secure automatic re-up rights for future funds offered by the manager. The latter advantage has proven particularly valuable for anchor investors in the funds of several highly successful - and now very hard to access - venture capital groups.

Palico is the Online Marketplace For PE Fundraising

The growing diversity of private equity means traditional methods of sourcing and evaluating investment opportunities aren’t enough. Palico’s private equity fund marketplace securely opens new avenues for limited partners online, with a vast range of primaries, secondaries and co-investments. Palico is where LPs go for more private equity.