Apex Group: Commentary On Fundraising Trends And Challenges

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Last quarter Apex Group unveiled Apex Invest, a new brand encompassing their technology and associated conference and events series designed to connect fund managers, allocators and service providers, both in-person and virtually.

Apex Invest has already been used by over 2,300 allocators and more than 1,500 funds, with 87% of allocators reporting allocating $45bn+ of funds via the technology platform; while the experienced events team have hosted over 25 large scale events over the past decade and facilitated 250,000+ meetings with investors from more than 25 countries.

Fundraising Trends And Challenges

Lana Callahan, Managing Director – Investor Relations at Apex Invest is seeing firsthand the fundraising trends and challenges in the market in the first half of 2023, as well as those which are set to continue or arise in the second half:

Continuation of existing trends

Sentiment is still positive, yet increasingly cautious as inflation may be slowing, but interest rates are expected to continue to rise in H2. Hot strategies include Private Credit, Real Assets and Infrastructure as investors seek returns uncorrelated from turbulent macroeconomic market conditions.

Investors are seeking out direct placements in these types of funds. Interest in digital assets as well as CTAs and commodities remains low compared to previous years. We are starting to see interest in distressed / special situations funds, as well as fintech focused strategies (eg to benefit from the popularity of AI-enabled business models);

‘Flight to familiarity’

Investors are seeking security in allocating to large managers – perception of “more AuM = more safe”. In H2, LPs will increasingly look to allocate to managers who can show experience and track record of making successful investments through the 2008 downturn. For open-ended funds, investors are seeking comfort in familiar/traditional long-short strategies;

The death of in-person fundraising process has been greatly exaggerated – investors are adopting hybrid fundraising approaches in the post-pandemic era:

In-person meetings and networking events remain the primary way of building long-term, productive relationships between allocators and funds. However, in the current economic environment, allocators and fund managers alike are keeping a close eye on costs, meaning that any in-person meetings must be more intentional and add significant value to the relationship.

Conference and in-person engagements will continue to be crucial for new and emerging fund managers. Those GPs are fighting against the broader ‘flight-to-quality’ movement that has LPs focusing on relationships with a smaller number of large/heritage/top performing managers – to overcome this, it is important for them to get out from behind desks and forge strong personal relationships with LPs;

Allocations to diverse managers:

There is growing momentum of allocators wanting to invest in minority and female-run funds; it is still only at c.1% of total capital allocated, so huge potential for further growth;

Co-investment strategies:

These strategies (and therefore the importance of LP-LP relationships) are increasingly attractive for LPs who are seeking lower management and performance fees, providing them with greater potential returns. LPs are also attracted by the higher levels of risk management, with greater levels of due diligence typically carried out on co-invest deals.

Where returns are squeezed, the lower fees provided by co-investment vehicles offer LPs the opportunity to create greater returns; and have greater control over their investment portfolio.

Family offices allocation hiatus continues:

Family offices may continue to sit on cash – ‘pausing’ allocation decisions, amid the prolonged market uncertainty.