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Fundraising in a recession: the credit crunch is set to have a significant impact on private equity fundraising in the year ahead. Patrick McCurry speaks to placement agents about the prospects for 2008.

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For placement agents the current market conditions are a double-edged sword. On the one hand, because it is harder to fundraise, buyout firms are more likely to seek the help of an agent. On the other, many institutional investors are more picky about what they will invest in and are taking longer to make decisions. This puts more pressure on the agents to find LPs the right funds and to offer GP clients a balanced investor mix.

Antoine Drean, founder of placement agent Triago, says that for the year or two leading up to last summer's credit crunch the fundraising environment was "too good to be true" because there was so much demand for private equity among investors and GPs were returning money to LPs very quickly. When the credit crunch occurred, LPs began to realise that a high proportion of those returns was due to the easy credit available, rather than because of factors such as operational improvements.

People will still be investing in funds in 2008, he says, but not to the same extent as previous years: "Last year about US$400bn was raised globally and a lot of that was mega funds. We won't see the same amount raised in 2008 but people will still be interested in smaller funds with superior strategies." There will be particular demand, he believes, for specialist funds such as turnaround, distressed and activist funds in certain niche areas.

He says: "Investors are seeking people who can deliver decent returns based on operational factors and value creation. For example, funds that can identify 'sleeping beauty' companies that are more complex than plain vanilla businesses but which offer great prospects if handled in the right way."

Mega trouble

Stephen Murphy, head of European fundraising at Private Equity Placements Group, says that fundraising is...

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