PE Conference Keynote Kevin Albert Looks to ‘Revolutionize’ Fundraising

Private-equity investment firms face a challenging fundraising environment, as tried-and-true sources of funding fade away and new, as yet unproven, opportunities appear on the horizon, said keynote speaker Kevin Albert during his opening remarks at the 2013 Michigan Private Equity Conference on Oct. 4. “I believe we’re at a point of inflection,” he told the nearly 200 top investors and industry practitioners who attended this year’s annual event at the Michigan Union. “The way people raise money is going to change.”

Albert, a veteran investor with a successful track record, is currently global head of business development and a partner at Pantheon Ventures, an international PE fund-of-funds manager. Based on his years of experience in the fundraising trenches, he offered this prognosis for different investor types that have filled the coffers of PE firms in the past:

  • Endowments, foundations and public pension funds will continue to be “steady Eddies.”
  • Corporate defined-benefit pension plans, once a major source of funding for private- equity shops, are “pretty much over.”
  • Europe is in “awful” financial straits, and a lot of investors on the other side of the Atlantic have left the table.
  • Sovereign-wealth funds are now hiring their own investment experts, so they can compete with U.S. and global PE funds for deals.
  • New investors in emerging markets are becoming fewer and farther between.

Albert noted that limited partners are consolidating their general-partner relationships, thereby putting additional strains on the private-equity industry. This trend, he predicted, will have both downsides and upsides:

  • The overall fundraising environment will be more difficult.
  • There will be fewer PE funds managing the available capital.
  • Differentiation of fund strategies will become increasingly more important.
  • It will be harder for first-time PE funds to gain traction.
  • Funds of funds will struggle with “tricky transitions.”
  • Conversely, the PE funds that survive and outperform the competition will have more market power, raise more money and increase in size.

One solution to this PE fundraising conundrum, Albert said, is to “go where the money is and where private equity can add value.” His prime target is defined-contribution plans, including corporate 401(k)s and public 403(b)s, in which employers, employees or both make contributions to individual retirement accounts on a regular basis. New measures will be needed, however, to overcome some of the challenges presented by this untested, but potentially lucrative, source of investment capital for PE funds. These accommodations include:

  • Creating a sleeve of assets in target-date funds.
  • Finding ways to put investment money to work quickly.
  • Providing accurate daily valuations for DC plan participants.
  • Maintaining sufficient liquidity in target-date funds.
  • Cultivating a new pipeline of investors.

The days when private equity was a black box where institutional investment money was locked up and held for years are coming to an end. “I believe we’ll be implementing private-equity vehicles for defined-contribution plans, and this will revolutionize fundraising in the future,” Albert said.

 For more information on the 8th annual Michigan Private Equity Conference, visit our page. 

 

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