Best of LinkedIn: Private Equity Fundraising CW 29/ 30

00:00:00: provided by Thomas Allgaier and Frennus, based on the most relevant LinkedIn posts about fundraising in private equity across calendar weeks twenty-nine and thirty.

00:00:08: Frenness supports PE backed manufacturers with the market intelligence needed to unlock revenue from idle production capacity.

00:00:15: you can find more info in the description.

00:00:17: Yeah!

00:00:18: And today's deep dive is really tailored for you if your a strategy M&A or investment professional.

00:00:25: we are unpacking the absolute top private equity insights across LinkedIn right now.

00:00:30: Right, specifically focusing on this heavily bifurcated fundraising market

00:00:34: we're in?

00:00:35: Exactly!

00:00:36: We'll get into the severe liquidity lob jam that's forcing a lot of structural innovations...the sudden surge of independent sponsors and how family offices are completely rewriting the LP playbook.

00:00:47: Yeah, because if you're watching the macroeconomic picture right now.

00:00:50: You are seeing a tale of two entirely different realities.

00:00:52: I mean on one hand The broad middle market is really struggling to get deals across the finish line But the capital that it's moving It has moved in fewer just absolutely massive checks.

00:01:03: So we were this weird scenario where overall US fundraising Has fallen.

00:01:07: yet there was this staggering mountain Of dry powder like two point one trillion dollars Just sitting idle.

00:01:14: Yeah, and why the freeze?

00:01:16: Right.

00:01:16: It really comes down to a fundamental lack of confidence not a lack of capital.

00:01:21: Charlotte Hogg pointed out that this two point one trillion dollars is basically awaiting regulatory clarity.

00:01:27: but beneath you have these massive bid ask spread.

00:01:31: sellers still want twenty-twenty one valuation?

00:01:34: Of course they do And buyers are underrating into twenty twenty four interest rates.

00:01:38: so the math just doesn't bridge gap.

00:01:39: That's why US fundraising dropped nineteen percent.

00:01:42: because LPS limited partners.

00:01:44: They're incredibly hesitant to hand over new cash when the deployment environment is, you know this murky.

00:01:49: Yeah To visualize this it kind of feels like mid-market GPs are trying to catch rain in paper cup while a handful Of massive firms have a direct high pressure pipeline into The main reservoir.

00:01:59: that's a great way to put It.

00:02:00: just how concentrated Is this capital actually getting?

00:02:03: Honestly, it's the defining winter takes all shift of this cycle.

00:02:07: Sean Barrett and Jemaine Ryman highlighted that just five mega platforms captured seventy three percent.

00:02:14: Seventy-three

00:02:16: percent?

00:02:16: Just five platforms.

00:02:17: Yes,

00:02:18: and if you look at the first half of the year mega funds took over eighty percent Of all capital raised.

00:02:23: meanwhile overall fund closings basically collapsed.

00:02:26: I mean we went from a market that regularly saw over a thousand closings down to A mere fraction of that.

00:02:32: Wow

00:02:32: And when you sing mega funds You meet The absolute Titans right If you're listening To this i'm wondering who is actually catching those checks.

00:02:38: What does the top of the food chain Look like?

00:02:40: so?

00:02:40: nicola abmeyer and sydjane broke Down the Top ten First Half buyout Fund raises.

00:02:45: Combined, they reached a hundred and twenty nine billion dollars.

00:02:49: KGR led the entire pack with the historic twenty three billion dollar vehicle And the rest of the list was heavily dominated by technology specialists.

00:02:56: So think firms like HG and Clearlig as well As Asia focused funds from EQT in Blackstone right?

00:03:03: Here's the critical data point.

00:03:05: every single one Of those top ten funds was larger than its predecessor

00:03:08: which kind of defies logic into down market doesn't it?

00:03:11: hmm Why are allocators defaulting so heavily to these specific massive brands when the broader market is flashing red?

00:03:21: Well, John Stuart unpacked this psychology behind us and it's fascinating.

00:03:24: Institutional investing is heavily driven by human defense mechanisms.

00:03:28: Okay now so...

00:03:30: When the macro environment gets volatile Allocators instinctively retreat to brand names.

00:03:35: It's that classic.

00:03:37: nobody gets fired for buying IBM effect, just applied to private equity.

00:03:41: An investment committee is far less likely to terminate an allocator For backing a global mega fund That underperforms than they are for.

00:03:49: you know taking A chance on a specialized middle market firm during the downturn.

00:03:54: But there's also this assumption out there that to raise a twenty billion dollar fund today, you just have to slap the letters A and I on your pitch deck.

00:04:02: And wait for the money roll in?

00:04:03: Yeah, that's the prevailing narrative.

00:04:06: but Francisco partners just proved the exact opposite.

00:04:09: Elliott T Friedman and Richard Liftig noted that Francisco raised twenty one billion and their core thesis is actually that AI adoption will lag the pace of innovation.

00:04:18: Wait really they raised twenty-one billion by betting against the immediate AI boom.

00:04:24: How does that

00:04:24: work?

00:04:24: Well, they aren't betting against the technology itself.

00:04:27: They're betting against Incredibly slow procurement cycles

00:04:39: right because big companies move slowly

00:04:41: exactly.

00:04:42: they recognize that just Because a Silicon Valley startup invents in new AI tool it doesn't mean A fortune-five hundred hospital system is going to integrate It into their patient data architecture tomorrow.

00:04:52: Yeah, That requires a massive compliance overhaul Right

00:04:55: and that friction Is highly investable?

00:04:57: It proves you don't need a hyped narrative To close a massive fund.

00:05:01: That's

00:05:01: super interesting.

00:05:02: But connecting this back to the broader freeze, The reason so much capital is either retreating to mega funds or just you know sitting on the sidelines.

00:05:10: It isn't just psychology it's mathematical

00:05:11: right?

00:05:11: Yes nicely LPs simply haven't gotten their historical distributions back yet.

00:05:16: You cannot commit To fund number five if Fund Number three hasn't returned your original capital

00:05:21: Right.

00:05:22: Peter Donadius and Trevor Noran shared data showing that the average buyout holding period has now stretched to a full seven years.

00:05:30: And historically, the model was built on a four-year flip?

00:05:33: Yeah!

00:05:34: Because of that stretch timeline so total value of funds assets minus its liabilities trapped in these zombie funds is just skyrocketing.

00:05:45: We are talking about billion dollars held in vehicles past their intended lifespans.

00:05:51: Wow,

00:05:52: because the traditional exit ramps like taking a portfolio company public or selling to a strategic buyer are essentially barricaded.

00:05:58: right now?

00:05:59: Right

00:05:59: and when traditional exits dry up The market has to manufacture its own liquidity.

00:06:03: GPS general partners Are under immense pressure to return cash to their LPs.

00:06:08: So what's the fix?

00:06:09: Well, that pressure is driving a massive surge in secondaries and structured fund finance.

00:06:14: Matt Kerfoot noted we just saw four billion dollars in preferred equity financings across five deals within six months period.

00:06:22: Let

00:06:22: us break down the mechanics of that preferred equity piece.

00:06:25: if you are a GP it essentially like taking out a second mortgage on your entire portfolio.

00:06:32: That is a highly accurate way to look at it.

00:06:35: The GP takes on debt-like financing backed by the portfolio's assets, and then they use that new cash In return, the firm providing the preferred equity gets priority on the first dollars out when those companies finally do sell plus a premium of course.

00:06:52: Yeah I saw brilliant analogy about the broader secondaries market that really clarifies why investors are flocking to this space.

00:06:59: Nimeshers Krivoskova describes secondaries as being like aged wine.

00:07:03: Oh

00:07:03: i liked.

00:07:04: Yeah, so if you invest in a primary blind pool fund.

00:07:07: You're basically buying the vineyard before the grapes are even planted.

00:07:10: yeah your trusting the GP skill but you have to wait years To see if the vintage is actually any good.

00:07:15: yes

00:07:16: and The secondary market Is the aged bottle?

00:07:18: You step-in.

00:07:19: Years later you can Actually See the underlying companies.

00:07:22: you know their revenue growth And you buy the steak at A discount

00:07:25: exactly shorter weights for Your money and Significantly de risk exposure.

00:07:30: And the institutional architecture is really shifting to support this too.

00:07:33: Michael Hacker pointed out that Alpenvest just closed out on the second, which has a fund strictly dedicated single asset continuation vehicles and Tom Callahan noted that NPM recently acquired NASDAQ's funds secondary business.

00:07:46: The entire goal there is to widen private market liquidity access by you know bringing direct shares and multi-asset fund stakes onto a single streamlined platform.

00:07:56: Okay but let me push back on.

00:07:57: Is a massive surge in continuation vehicles and secondaries actually assigned of market maturity?

00:08:05: Or is it just a Band-Aid over much deeper structural

00:08:07: flaw?"?

00:08:08: That's great question.

00:08:10: Jared Turner raised this exact counterpoint, he argues that the secondary surge isn't only innovation but also the delayed consequence for an incredibly cheap zero interest rate capital.

00:08:23: Exactly.

00:08:24: That era, artificially inflated fund sizes far beyond what their underlying investment strategies could actually support.

00:08:31: Ah so it's a scale versus discipline problem?

00:08:34: Bingo!

00:08:35: If you have a strategy that generates true alpha by doing fifty million dollar deals at a three hundred million dollars fund size.

00:08:44: That same strategy rarely translates.

00:08:46: when you raise two billion dollar funds and are forced to write three-hundred million dollar checks, the discipline just breaks down!

00:08:52: Yeah that makes sense.

00:08:53: By the way if your finding this breakdown of market mechanics useful make sure you subscribe to The Deep Dive.

00:08:57: so catch all our future strategies in M&A editions.

00:09:00: Good call.

00:09:01: So moving on from secondaries GPs trying another structural fix solve liquidity lock up And thats Evergreen Fund.

00:09:08: This is a massive push into semi-liquid structures.

00:09:11: But the mechanics are fundamentally different from how private equity usually works, aren't they?

00:09:15: Yeah so to clarify the difference for anyone who might not work with these daily traditional drawdown.

00:09:20: funds call capital over time.

00:09:23: Megan Jacobson detailed this well.

00:09:25: As a GP finds deals over a five-year investment period, they call down the capital you committed.

00:09:31: Evergreen structures conversely offer continuous deployment with periodic redemption windows.

00:09:37: It functions much more like a mutual fund or an ECF but for private assets

00:09:41: And Yatchou give a great look under the hood of this.

00:09:43: when Azalea launched their evergreen PE Fund it took them a meticulous two year build just to design the operational capabilities.

00:09:51: I believe it!

00:09:51: Yeah, you have to figure out how to constantly value illiquid private companies manage cash drag from constant inflows and set up the legal structures for redemptions.

00:10:00: yeah It's incredibly complex

00:10:02: And that complexity is where The Reality Check comes in.

00:10:05: Jan Voss pointed out that investor skepticism Is mounting rapidly around the actual liquidity promises of these funds?

00:10:11: It sounds fantastic on paper right?

00:10:13: Private equity returns with ETF like ease.

00:10:17: But Mohit Sondi asks the critical question, when the macro market cracks are those redemption gates going to slam shut?

00:10:24: And a redemption gate just to be clear is a clause that allows the fund manager to freeze withdrawals if too many people ask for their money back at once.

00:10:33: Right!

00:10:33: It stops a run on the bank so

00:10:38: Precisely.

00:10:39: But what's truly fascinating is where that run on the bank risk actually originates, Snorri Co-Food Hansen shared a brilliant cautionary tale about this.

00:10:48: he noted That The Biggest Risk to an Evergreen Fund isn't always the portfolio itself.

00:10:53: sometimes it's the composition of other shareholders.

00:10:56: Wait how so?

00:10:57: Well He pointed to Blue Owl's Odick fund.

00:10:59: in early twenty twenty six they saw redemption requests suddenly spiked nearly forty percent

00:11:04: Wow.

00:11:05: And the immediate assumption in market was that underlying credit quality of their loans must be failing, but it wasn't bad

00:11:11: credit!

00:11:11: So what triggered a forty percent redemption request out of nowhere?

00:11:15: A single wealth distributor UBS sent out a macro advisory note telling its clients to trim their private credit exposure.

00:11:22: And because UBS controlled such a massive block of the capital in that specific fund, there's single advisory no triggered a massive run.

00:11:31: Oh wow!

00:11:31: Yeah distribution concentration not portfolio quality drove the crisis.

00:11:36: That is terrifying blind spot for an allocator.

00:11:38: yeah I mean if you're evaluating and evergreen structure You can't just diligence the underlying assets.

00:11:44: You have to run deep diligence on your fellow LPs, To know who has the power to pull The rug out from under-the funds liquidity.

00:11:51: Exactly it changes the entire risk model.

00:11:53: Which brings us to the ultimate question for the middle market if LPs are exhausted by being locked into liquid funds.

00:11:59: They're wary of the structural risks of evergreen models and they're only handing Out new primary capital to massive mega funds.

00:12:06: Where do the entrepreneurial midmarket deal makers actually go?

00:12:10: The data points to a massive resurgence in the deal-by-deal independent sponsor model.

00:12:15: Alberto Ginova observed that this seven year fund raising low for blind pools is actively pushing highly skilled deal makers toward these structures.

00:12:22: and, for the uninitiated an independent sponsor doesn't raise a five hundred million dollar blind pool upfront.

00:12:30: they go out find a specific company negotiate the purchase sign the letter of intent

00:12:39: Right.

00:12:40: And John Kuppel shared data showing why allocators are loving this right now, independent sponsor deals or actually outperforming committed funds on quality deal flow and alignment.

00:12:50: they're generating a median twenty three point eight percent internal rate of return or IRR.

00:12:57: that's huge.

00:12:57: yeah it's roughly five points higher than comparable buyout

00:13:00: funds.

00:13:00: Why such a massive premium in

00:13:02: performance?

00:13:03: It really comes down to Alignment & Feed Drag.

00:13:05: Traditional funds charge a two percent management fee on committed capital, whether they invest it well or not.

00:13:11: Independent sponsors only get paid when the deal closes and performs.

00:13:14: Oh okay You force the sponsor to prove the fundamental value of every single asset rather than letting them hide one terrible deal inside at a diversified pool of ten average ones.

00:13:24: Paul Stanton brought up really interesting historical parallel to this.

00:13:28: He argued that most entrepreneurial minds today are basically reviving the eighteenth-century Merchant Bank model.

00:13:35: Oh, I saw that!

00:13:36: Yeah Before modern ten year blind pools existed merchant bankers risked their own capital alongside private clients on a purely deal by deal basis.

00:13:46: He noted they're using this model to co-invest along side Private Wealth in highly esoteric niche platforms.

00:13:52: Right

00:13:53: His specific example was Polonia Timber which is fast growing hardwood species

00:13:58: which perfectly illustrates why the independent sponsor model works for certain assets, right?

00:14:03: A strict seven-year deployment and exit clock makes zero sense for a timber asset.

00:14:07: Exactly!

00:14:08: You can't force a tree to grow faster just because your limited partnership agreement expires in twenty thirty.

00:14:13: No you really can't.

00:14:14: they are ripping out artificial institutional timelines of traditional funds that match capital structure with actual biological or operational reality.

00:14:23: But

00:14:23: let's look at harsh mechanics.

00:14:26: If an independent sponsor doesn't have a committed fund sitting in a bank account, how do they actually finance the deal before the seller gets impatient and walks away?

00:14:35: Because once you sign an LOI letter of intent.

00:14:38: The clock is aggressively ticking.

00:14:40: Yeah that financing risk And the time decay associated with it.

00:14:44: That's number one reason independence.

00:14:46: sponsored deals die.

00:14:47: Peter Martinson explained that to survive this hurdle, independent sponsors are increasingly relying on dedicated capital raise advisors.

00:14:55: The moment an LOI is signed they need a specialized syndicate team to assemble the equity and debt instantly basically turning assigned piece of paper into fully funded clothes.

00:15:05: which begs question who's writing actual equity checks for these deal by deal syndicates?

00:15:10: because it certainly isn't your traditional state pension funds.

00:15:14: The capital backing these independent sponsors and niche deals is heavily concentrated in

00:15:22: family

00:15:22: offices.".

00:15:28: Two-thirds of surveyed family offices are actively expanding into direct equity investing.

00:15:33: Right,

00:15:34: Ronald Diamond expanded on the rationale there.

00:15:36: Family offices answered to the family patriarch or matriarch so every single basis point of fees is heavily scrutinized.

00:15:43: They're no longer treating private equity as a passive checkbox allocation where they pay two percent and wait a decade.

00:15:50: They are evaluating independent sponsors as operators.

00:15:52: They ask, could this person have actually run my family's core operating business?

00:15:56: Exactly.

00:15:57: Integrity under pressure tells them far more than a perfectly modeled Excel IRR.

00:16:03: but this shift creates immense friction in the market.

00:16:06: Sophia Tulipova pointed out a fascinating dynamic.

00:16:09: Family offices are now acting as anchor investors for emerging managers while simultaneously competing directly with those exact same managers for direct deals.

00:16:18: Think about how complex that gets.

00:16:20: When the same pool of capital shows up on both sides of an M&A mandate, Both as the LP funding the PE firm and is a direct bitter against them.

00:16:30: origination speed not the size-of-the check becomes The ultimate deciding factor

00:16:34: which Is an incredibly risky game to play if A family office doesn't have true institutional infrastructure.

00:16:42: Pravin Sivanathan issued a stark warning regarding this trend.

00:16:45: He strongly advised that most family offices should co-invest alongside proven GPs long before ever attempting direct solo deals.

00:16:53: Right because if they try to fly solo too early, They suffer from severe adverse selection.

00:16:58: In private markets, adverse selection means you only end up winning the deals that all of professional dedicated PE firms already looked at and passed

00:17:05: on.

00:17:05: Exactly!

00:17:06: Just because a founder has great gut feeling from running a manufacturing company for thirty years doesn't mean they know how to structure a leveraged buyout.

00:17:14: Being a phenomenal operator in single family business does not automatically make you a sophisticated capital allocator across diverse sectors.

00:17:22: Totally Let's shift our focus into another massive capital pool that is becoming increasingly vital to direct investing in co-investments, golf and GCC investors.

00:17:33: Rachel AZ pointed out that the Gulf region currently holds over two point five trillion dollars in Sharia compliant assets.

00:17:40: Yeah, and this strategic posture of capital is fundamentally different from Western institutions.

00:17:45: Abbas Hashmi shared data showing that GCC investors allocate a staggering seventy-two percent of their portfolios to growth assets.

00:17:52: Wow!

00:17:53: That includes a dedicated fourteen percent specifically private equity.

00:17:57: if you contrast with many western portfolio right now which are sitting defensively on cash or high It's a completely different risk

00:18:04: appetite.

00:18:05: But let's pause and dig into the mechanics of Shariah compliant private equity because it completely rewrites The standard PE playbook, traditional private equities specifically leveraged buyouts relies heavily on loading A target company up with debt to amplify returns.

00:18:20: And that is the exact friction point.

00:18:23: Sharia compliance strictly prohibits REBA or the earning of interest as well as excessive speculation and high leverage.

00:18:30: You cannot simply buy a company using seventy percent debt, and saddle-the-balance sheet with massive interest

00:18:36: payments.".

00:18:37: So how does a Sharia compliant PE deal actually function?

00:18:40: It forces model away from financial engineering toward pure growth equity and asset backed value creation.

00:18:47: The deals have to be structured around profit and loss sharing, meaning the investor and company share their actual operational risks.

00:18:55: It requires backing tangible assets in real economic activity rather than just restructuring a balance sheet – it makes them incredibly patient structural partners for companies that actually want to build instead of optimizing for quick

00:19:07: flip."

00:19:08: And they are leveraging capital for strategic autonomy.

00:19:12: Kamar Jaffer noted this.

00:19:13: GCC Capital is aggressively demanding co-investment rights.

00:19:17: We are seeing this heavily in sensitive sectors like defense.

00:19:20: LPs are using creative structuring, like parallel vehicles and feeder funds to ensure that their institutional financial returns directly align with their national security and economic diversification priorities.

00:19:31: which brings us to the final And perhaps most difficult question How do you actually capture?

00:19:36: This massive capital whether your pitching a multi-billion dollar sovereign wealth fund in The Gulf or a sophisticated single family office in New York?

00:19:45: Ahmed Hussein provided what I thought was an absolute masterclass insight on the psychology of raising big money.

00:19:52: He said that Big Money moves at the speed of trust, and this is a critical distinction—belief is not

00:19:58: trust.".

00:19:58: It's a profound difference!

00:20:00: You can win an LP's belief by presenting in eighty-page data room with a flawless track record —they might believe your numbers are accurate but they still won't wire the money because trust is fundamentally emotional

00:20:11: Right.

00:20:12: He pointed out that consensus is the actual machine that moves big money, massive pools of capital hide behind layers of investment committees and by design committees are structurally incapable of making contrarian high-risk bets.

00:20:26: Yeah so true differentiation requires The fundraiser to experience a complete ego death.

00:20:32: You cannot walk into the room trying to prove you are the smartest person there.

00:20:54: If the structural mechanics of the market are moving us toward a barbell world with hyper-concentrated multi billion dollar mega funds on one end and highly specific deal by deal independent sponsors, what happens to traditional middlemarket blind pool fund?

00:21:11: Does it slowly go extinct as LPs demand either absolute scale or absolute alignment.

00:21:17: Or will evolve into something completely unrecognizable over?

00:21:23: Also check out our other editions on PE, Value Creation, PE, Exit Strategies, Venture Capital, M&A and Strategy & Consulting.

00:21:31: Thank you so much for joining us – don't forget to subscribe!