Intertrust, l provider of high-value fund, trust and corporate services, has issued a report on the private equity market and found that only 26% of investors expect to see long-life private equity fund structures, (which have a term of between 15-20 years and charge lower management fees) rising in popularity over the next five years.
The report, which details the findings of a recent survey of 142 private equity professionals, identified that almost 60% believe greater flexibility to invest in portfolio companies for longer periods to improve returns is a driving factor in the growth of long-life funds.
A further 34% stated that they have a greater ability to invest in sectors delivering longer term investment horizons. In contrast, 38% of investors expect to see short-dated funds with term limits of between three and five years grow in popularity.
Paul Lawrence, Global Head of Funds at Intertrust commented: ‘A maturing industry is resulting in more experimentation with fund structures. Short-term funds are popular among new managers attracting LPs who are cautious of locking up their capital for a decade or more in an untested strategy. Conversely, long-life funds are under less pressure to deploy capital and can hold portfolio companies for a lot longer, but investors want to see a successful track record before committing. The bottom line is that fund structures need to reflect the alignment of GP and LP interests.’