Taking the Pulse of Our LP Community Amidst Uncertainty
This May, we had the privilege of hosting the 3rd RAISE LP Summit, "The LP Playbook: Proactive Management in Uncertain Times." Over 245 members of the RAISE LP community joined together to share insights on navigating firm management in volatile times.
As always, we took this opportunity to gather insights from the group via live polling during the event. Here's what our LP community had to say.
1. Cash Runway for Portfolio Companies Is a Big Concern
Not surprisingly, the shrinking cash runway of portfolio companies in this current climate is a major concern for 41% of our LP participants. Not far behind, 34% of LPs are troubled by the time it takes for portfolio companies to become liquid.
2. Increased Readiness to Consider Secondary Transactions
Anticipating that liquidity might be high on the list of concerns, we sought to understand the selling price threshold for secondary transactions. We found that 39% (up from 27% last year) would contemplate selling their legacy assets in a secondary market if they could secure a price of 90-100% of NAV. This shows a rise in readiness to consider secondary transactions at lower prices compared to last year.
3. Commitments to Existing GPs Are Being Reassessed
Understanding that unstable times often necessitate a proactive approach to portfolio diversification, we learned that 41% of responding LPs are reassessing their options concerning existing relationships, while 31% are choosing not to re-allocate to certain managers.
4. Selective Deployment Continues
In an attempt to help forecast capital deployment in the coming year, we saw an overwhelming 77% of responding LPs describe their strategy as selectively deploying, demonstrating a cautious yet hopeful approach.
5. LPs Are Optimistic About Lower Entry Points and Better Terms
Despite the challenging market landscape, new opportunities often emerge. Lower entry points have 42% of our LPs buzzing, and a notable shift of power leading to more investor-friendly terms has a quarter of attendees equally excited.
6. DPI Is the Most Critical Performance Measure
Lastly, we sought to understand the evolving KPIs for our LPs. Distribution to Paid-In capital (DPI) was unsurprisingly the most critical performance measure for 46% of respondents, followed by Multiples, and IRR a close third.
We’re looking forward to another pulse check with hundreds of LPs this fall, when they join us for the eighth annual RAISE Global Summit, October 26th in San Francisco.
If you are like the other LPs we spoke to recently and are seeking relationships with the next generation of focused, right-sized funds, please request an invitation today. If you have emerging managers who might be interested in applying, please ask them to apply on this page by June 30th.
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