These are turbulent times for investors in private equity. The Dow can be down 300 points by lunch only to rebound an hour before the close of market. Debt markets, which once showed an insatiable appetite for risk, are becoming more conservative by the day. Spreads on announced public-to-private transactions have widened as investors question the viability of these deals.
During this chaotic period, general partners may be questioning who among their investor base is a true long-term investor in private equity. Uncovering this information can be difficult, as nearly all LPs will say that they are long-term investors in the asset class.
To assist General Partners everywhere, here are 10 signs that you may have LPs that are not long-term investors in private equity:
10. After signing the subscription agreement, asks “what is it that you do again?”
9. Requests that capital contributions be charged to a credit card.
8. Attends meetings wearing “I invested in Fund X and all I got was this lousy T-shirt.”
7. Says that investing in private equity will make up for a pension fund that is 20% funded.
6. Staff also handles hedge funds, timber, building maintenance, IT, PR and cafeteria duties.
5. Also moved to New Haven to be more like Yale.
4. Only invests in funds with a twenty-year track record (but made an exception this time).
3. Expects to be able to obtain top decile return by looking into the souls of funds’ managers.
2. Asks if they should expect their distributions weekly or monthly.