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Side Letter: First-time fundraisers

First-time fundraisers

Though it's never easy to launch a first-time fund, the task is an especially challenging one in 2023. With many LPs having to make tough decisions about their private equity portfolios, emerging managers may have to go that extra mile to build new investor relationships. In the interest of maximum visibility, our colleagues at Buyouts last week published a list of some of the more interesting emerging managers in market this year (registration required).

The list - which, it should be noted, is subjective - is well worth bookmarking for any investor that has, or will have, the capacity and appetite to form new GP relationships. Here are a couple of newcomers that caught Side Letter's eye:

Coalesce Capital: one of the newer firms on this list, business services-focused Coalesce was launched this year by former Warburg Pincus dealmaker Stephanie Geveda and is seeking $ 750 million for its debut vehicle.

Dynasty Equity: the sports-focused firm was launched by Providence Equity Partners founder Jonathan Nelson and PJT Partners' Don Cornwell. It is reportedly seeking $1 billion for a debut fund.

Kanbrick Holdings: founded by Berkshire Hathaway alums Tracy Britt Cool and Brian Humphrey, the firm is reportedly seeking $500 million for long-term investments in consumer, business services and manufacturing companies.

Newlight Partners: the Soros Fund Management spin-out is seeking $1 billion for investments in broadband connectivity, financial services, healthcare and tech.

Keeping PE in the family

Family office appetites for direct PE shrank last year amid a wider strategic reallocation of portfolios. Direct PE allocations among global family offices fell to a planned 6 percent for this year, compared with 9 percent last year and 13 percent in 2021, according to the UBS Global Family Office Report 2023. Appetites for PE funds, meanwhile, remained level with last year at 10 percent, and up from 8 percent in 2021.

The proportion of family offices that invested in direct PE in 2022 fell to 60 percent, down from 67 percent. What's more, the net proportion (increase minus decrease) that plan to raise their direct PE allocations fell to 28 percent in 2023, down from 42 percent last year; for PE funds, the proportion fell from 38 percent to 21 percent. This decline comes amid a shift towards developed markets fixed income, which saw allocations grow from 12 percent in 2022 to a planned 15 percent in 2023, and emerging markets equities, which rose from 6 percent to a planned 9 percent.

Globally, family offices allocate 19 percent to PE on average, with US investors above average at 24 percent and European investors below average at 17 percent. Despite appetites becoming more muted, two-thirds still believe that illiquidity boosts returns. Here are some other key findings:

• Geopolitical tensions are the top concern for family offices, with allocations to China falling 3 percentage points to 7 percent, and allocations to North America climbing 5 percentage points to 48 percent.

• The net proportion of family investors planning to raise their Western Europe allocations rose to 21 percent in 2023, from 15 percent last year; while for Asia-Pacific (ex Greater China) the net proportion fell from 50 percent to 29 percent.

• Almost half ( 45 percent) of family offices are planning to over-allocate to secondaries in the next 12 months.

• Tech and healthcare sectors remain the most popular investment in PE.

• Across 230 family offices surveyed, the total net worth of investors reached $495.8 billion, averaging $2.2 billion per family office.

Thanks to UBS Family Office and PEI for Publishing

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