GP-LP Relationship
GPs struggling to raise subsequent funds from current LPs

Archimede Mulas London 25.03.19

For our friends in the Private Equity world - Andrés Ramos and Michael Roth, from Cobalt data, published a dreary report on the current struggles of GPs to raise further funds from current LPs. Find the full report here: https://www.cobaltgp.com/lp-re-up-rates/

​To summarise the situation - assets under management by private equity funds are rising - from $1.3 Trillion ten years ago to $3.3 Trillion to-date (data from Hamilton Lane), a 157% growth over 10 years.

This is a combination of funds getting larger, a lot of liquidity in the market, and many emerging managers raising first time funds with innovative and traditional propositions.

What all managers know, is that once the first fund is raised, it is not over, and you need to start thinking of raising your next one!

Source: Cobalt GP

Although there is a will to go back to your original LPs, and raise funds from them first, this is getting always harder. Cobalt analysed 125  fund managers with and average of 3.4 funds each and more than 650 limited partners.

Source: Cobalt GP

 The results?

​Shocking! Only 55% of current LPs were committing to subsequent funds. Although this is still a little more than half - it is the 18% fall from 67% - ten years ago - which is staggering. 

Cobalt also found there is little correlation between re-up rates of lower-quartile funds and top-quartile funds, but found that the larger the AUM of the new fund, the more likely LPs will follow-on.

Andrés and Ramos say that one of the major reasons for this loss of commitment is the "LP's dissatisfaction with their investment experience."

We recommend reading Cobalt's full report (https://www.cobaltgp.com/lp-re-up-rates/) - with their recommendations. A high churn-rate is never a good sign for portfolio companies, let's show them how it's done!

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Collective Equity Ownership Ltd. (CEO) is a secondary fund. We allow founders and shareholders of VC-backed companies to pool together their shares with other late-stage companies to diversify their portfolio.
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