New research from Preqin, based on a survey of 40 private equity investment consultants, shows that when naming traits a fund manager needs to possess in order to meet its fundraising target – and therefore whether it is worth expending time and resources on – investment consultants prioritize performance track record at a team level.
However, when looking for warning signs that a manager will not fundraise successfully, a firm’s performance track record, rather than a team’s, is their highest priority.
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This suggests that if a firm has a poor performance track record, investment consultants and the investors they advise are not likely to commit to that firm’s vehicles regardless of changes in the firm’s team, as they believe the investment remains too risky.
Key Facts:
- 74% of investment consultants surveyed by Preqin state that a fund manager needs a successful performance track record at a team level to meet its fundraising target, whereas only 63% say that having a successful performance track record at a firm level is the most important trait needed.
- However, when naming warning signs that a fund manager will not successfully fundraise, 83% of investment consultants surveyed named poor performance track record of a firm as a warning sign and 80% named poor performance track record of a team.
- 83% of investment consultants stated that the best key indicator that a fund will outperform peer funds is a successful performance track record at a team level; only 34% named a successful performance track record at a firm level.
- 77% of investment consultants named a firm’s experience or expertise with their fund’s strategy as a key indicator that a fund will outperform peer funds.
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By GlobalData
