GPs feel the pressure to invest in own funds

Private equity general partners are feeling increasingly pressurised into investing more personal capital into their firm's next fundraising, new research finds.

Private equity general partners (GPs) are feeling increasingly pressurised into investing more personal capital into their firm's next fundraising, new research finds.

Of those 88 UK-based senior private equity professionals surveyed, while four in five feel that they should invest more in their firm's next fund, 35 per cent say they cannot access sufficient finance to commit to a greater investment, statistics from Investec Fund Finance show.

The survey finds that the expectation to invest more resides with limited partners (LPs). As well as highlighting a lack of access to further capital, 25 per cent are reluctant to be overexposed in a single investment and 18 per cent say they are already committed to the maximum allowed for their level in the firm.

Simon Hamilton, head of fund finance at Investec Fund Finance, comments, 'LPs are increasingly looking for GPs' interests to be more closely aligned with their own through a more significant investment into their own funds.

'We have recently seen GP commitments of over 10 per cent in certain funds, which has proven extremely popular with investors. However our research shows that almost four fifths (78 per cent) of GPs are unable or unwilling to invest any more.'

Hamilton says that this trend has seen a threefold increase in lending to GPs.

The research finds that on average GPs are planning to personally invest approximately £200,000. On top of that, 38 per cent plan to invest between £100,000 and £500,000, 10 per cent between £500,000 and £1 million and a further 10 per cent in excess of £1 million.