It's harder out there.
Our second annual survey of GPs and LPs, the Investment Funds Outlook Report, comes at a time when the private funds market is becoming increasingly difficult to predict. As costs on all sides of the deal table rise, how can LPs and GPs best navigate what’s to come through the rest of 2024 and beyond?
Our Investment Funds Outlook Report draws on insights from limited partners (LPs), general partners (GPs), and service providers across the private funds landscape and looks into the changing relationship between LPs and GPs as the former gains leverage. It also delves into some of the hottest trends in today’s market, including artificial intelligence, cryptocurrency, private credit, and new regulatory challenges.
Get the full 2024 INvestment Funds Outlook Report
Nearly 40 percent of GPs and LPs surveyed increases in expenses over the past 12 months, which is more than twice the number reported last year. The majority of all respondents also saw high rates of fundraising period, investment period, and term extensions, as well as changes in GP commitments.
A whopping 96 percent of LPs say it is important that a fund have a succession plan in place (up from 66 percent last year), but only 38 percent of GPs currently have one.
About 20 percent of respondents’ private credit portfolios experienced restructuring activity over the past six months; most expect the level of restructuring activity to stay the same (49 percent) or increase (44 percent) in the next six months.
This is occurring amid market recovery and investors’ embrace of innovative products.
of deals fall through or are interrupted due to ESG concerns
50%
Partner in Barnes & Thornburg’s Private Funds and Asset Management Group
Catherine Turgeon
Uncertainty in the markets and rising interest rates have made equity financings less attractive to investors, resulting in a drop in the PE activity of many private investment funds. This has also caused many portfolio companies to look to their existing PE investors for follow-on investments, to support the business until a new equity round can be raised on attractive terms
Co-chair of Barnes & Thornburg’s Private Funds and Asset Management Group
Jahan Sharifi
It’s a truism that when you have changing markets, you have more interesting investments. As our current economic uncertainty persists, the more sophisticated, thoughtful, and analytical funds have an opportunity to get out in front. Our hope is that the insights gathered in this report can help them do just that.
Kerry Potter McCormick
GPs, especially less experienced ones, will have to find innovative ways to attract LP dollars and address concerns about ESG and succession planning. At the same time, stakeholders on all sides of the deal table will need to make sure they’re getting the right risk-reward balance, while making preparations to adapt to inevitable shifts in the markets.
Scott Beal
A year and a half away from the FTX collapse, we’ve seen significant recoveries in bitcoin and other cryptocurrencies. The SEC’s approval of bitcoin ETFs is a big deal for the industry and may also increase the willingness of allocators to make investments in private crypto funds and other nonregulated products.
Adoption is vital, considering that the vast majority of respondents expect generative and traditional AI to have a significant impact on fund performance over the next three years.
The New GP-LP Dynamic: Changing Fund Terms, Emerging Challenges, and Misalignment Abound Succession Planning Takes Center Stage ESG is a Key Priority — at Least for LPs
Life Sciences Funding Comes Down to Earth — But Outlook Remains Positive
Real Estate Private Equity: Proceeding with Caution
Digital Assets: Will Crypto Spring Back?
Download the 2024 Investment Funds Outlook Report
Get the full Barnes & Thornburg Private Funds Outlook Survey
On an earnings call late last year, Blackstone president Jonathan Gray offered a succinct summary of the institutional fundraising climate:
Get the full Barnes & Thornburg Investment Funds Outlook Report
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There are numerous instances where incorporating AI could benefit fund managers, from market analysis to automating research processes to simply freeing up managers’ time. It follows that such technologies will have a positive overall impact on fund performance.
say tighter lending standards have favored private credit
The second annual Investment Funds Outlook Report comes at a time when the private funds market is becoming increasingly difficult to anticipate and when costs on all sides of the deal table are rising.
Barnes & Thornburg’s 2024 Investment Funds Outlook Report draws on insights from limited partners (LPs), general partners (GPs), and service providers across the private funds landscape and looks into the changing relationship between LPs and GPs as the former gains leverage. It also delves into some of the hottest trends in today’s market, including artificial intelligence (AI), cryptocurrency, private credit, and new regulatory challenges.
The report also provides insights into opportunities in private credit, crypto and AI:
The second annual report comes at a time when the private funds market is becoming increasingly difficult to anticipate and when costs on all sides of the deal table are rising.
Barnes & Thornburg’s 2024 Investment Funds Outlook Report draws on insights from limited partners (LPs), general partners (GPs), and service providers across the private funds landscape and looks into the changing relationship between LPs and GPs as the former gains leverage while also delving into some of the hottest trends in today’s market, including artificial intelligence (AI), cryptocurrency, private credit, and new regulatory challenges.
expect fund term changes benefitting LPs
75%
59%
PERCENTAGE POINTS separate the expectations that LPs and GPs have for fund management
15
Seventy-seven percent of LPs want the funds in which they invest to use AI for investment analysis and decision-making, but only 26% of GPs have implemented AI functions. Adoption is vital, considering that the vast majority of respondents expect generative and traditional AI to have a significant impact on fund performance over the next three years.
Download the Barnes & Thornburg Investment Funds Outlook Report
