Secondaries Survey

Apologies, but Almedia Capital has asked us to remove the survey…

I’ve written a lot about the difficulties faced by first-time fund managers when raising inaugural funds, and spoke with two such managers yesterday. The gripes were familiar: “Most LPs would rather do follow-on funds with longtime general partners. Why don’t they want to take any risk?”

But a new secondary market study by Almeida Capital indicates that risk aversion may not be the primary reason for LP disinterest in first-time fund managers. Instead, it may be a more endemic aversion to any new general partners, due in part to time/staffing/etc. constraints. The Almeida study asked LPs for their motivations when selling partnership interests on the secondary market – and broke the respondents into two groups: Funds-of-funds and other LPs. Among the later category, 50% responded than a selling motivator was to “reduce the number of GP relationships.” In fact, it came in second only to the universal desire to dump poorly-performing funds. You can view the entire study here.

As an anecdotal addendum, I was at a conference recently and overheard a conversation between a major buyout pro whose firm was fundraising, and the head of alternatives for a major insurance company. It went something like this:

GP: We’d like to get a meeting with you.

LP: I’ll try to set it up, but we’re really just doing re-ups right now – and barely have enough time for that.

And this GP was from a brand-name firm. Imagine if he was a first-timer…