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2014: Top 10 Hottest Topics In Private Equity Industry

By Mani
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With 2014 set to end, Preqin has come out with a round-up of the year’s 10 hottest topics in the private equity industry featured in the firm’s research during the last 12 months.

Some of the hot topics covered include a rise in public pension funds investing in private equity and opportunities in the co-investment space.

Appetite for co-investment

Preqin in its latest report titled: “Private Equity Spotlight: 2014 in Review” points out the recent turnaround witnessed in the venture capital industry. As detailed by ValueWalk, in November 2014 Preqin pointed out that returns from more recent venture capital funds have picked up significantly. Moreover, the report highlighted that this improvement was not just limited to top performing funds, as evidenced from the following graph:

Among the hot topics in 2014, Preqin highlights the highest annual distributions from private equity investments in 2013.As reported by ValueWalk, in its September 2014 report, Preqin highlighted that LPs will be relieved to see distribution levels picking up following the lack of capital return between 2008 and 2010.

As can be deduced from the following graph, the report highlighted the extent to which distributions have surpassed amounts called:

PE-Amount called and distributed Private Equity

Appetite for co-investment

In its March issue, Preqin highlighted the attraction of co-investment opportunities, and its exclusive survey into LP and GP attitudes in the co-investment space revealed that 2014 would witness an increase in co-investment activity:

Appetite for co-investment Private Equity


You can learn more about the topic at this ValueWalk link.

As another of the top 10 hottest topics in the PE industry in 2014, the report also highlights the prominence of the top 30 fund managers. The report notes fundraising figures for 2013 show that the top 30 fund managers contributed over 34% of total capital raised for PE vehicles, and over the last 10 years, these managers had raised $1.2 trillion in aggregate capital commitments.

Diversification of secondaries transactions also featured among the top 10 hottest topics for 2014. The report notes the successful secondaries fundraising environment was driven by the dual effect of regulatory pressure on financial institutions and the post-crisis behavior of large pension funds focusing investments on fewer managers.

Private equity industry: Impact of JOBS Act

The JOBS Act was another hot topic in 2014. The question at hand was could it provide some benefits to alternative investment managers, or were the benefits of access to the general public outweighed by concerns such as increased scrutiny of regulators, negative perceptions about marketing and the additional costs related to advertising. The report points out that it will take time to see how the industry will embrace the opportunities offered by the JOBS Act.

The Preqin report also ranks the rise in public pension funds investing in private equity among the top 10 hottest topics. In its October issue, Preqin highlighted that as of October 2014, the average US-based public pension fund’s allocation to private equity was 7.0% of assets under management, which is only a slight dip from the previous year’s figure of 7.2%. The report notes that this type of investor still has a healthy appetite for private equity investments, and has been ramping up activity in recent years.

Active US-based public pension funds Private Equity

The report also lists “fund terms and conditions” among the hottest topics. The report notes the increasing importance of terms and conditions and the need for a true alignment of interests between GPs and LPs is heightened this year, with the crowded fundraising market in which GPs are finding themselves, and more funds on the road than ever competing for investor capital.

The Preqin 2014 review also highlights the correlation between the fundraising success of certain fund types and their risk-return profiles.

Risk and return by fund strategy Private Equity

Preqin also highlights esurgent Europe as one of the top 10 hottest topics of the year. The research firm notes fundraising had been increasing year-over-year in Europe since 2010, contributing to the record levels of dry powder focused on the region:

Resurgent Europe Private Equity

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