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Last week, PitchBook released its Q3 Private Fund Strategies Report. If you haven’t had a chance, give it a look – it makes for interesting reading.

In a nutshell, private equity – despite some pandemic-driven hiccups – continues its meteoric rise. Fund sizes are growing, specialist funds are being raised and launched by sector giants, LPs continue to deploy and redeploy capital, and dry powder continues to outpace itself year over year.

One wonders if the growth will continue at the current pace or trail off – external political and economic factors certainly portend some dark days ahead for particular asset classes. However, private equity continues to be one of the more adaptive sectors, and seemingly at least the more established firms are well-poised to ride out any rough waters.

But as the race for alpha becomes more competitive, certainly the universe of target LPs and management teams will grow smaller and smaller.

Those with well-thought-out communications plans will continue to place themselves in stronger positions for more and larger fund commitments as well as attractive portfolio company opportunities.

Through that lens, here are the key themes from PitchBook’s report, and what is top of mind for us here at Luther Pendragon as we are advising our clients.

1. LPs are looking to streamline their portfolios – allocating to fewer fund managers (but making larger fund commitments).

Our take for PE firms: Do you have a well-defined investment strategy, and is that communicated properly to the market? How are you differentiating yourself from your competitors? Are you seen as a thought leader? Are you regularly speaking with the LP community through strategic speaking opportunities, media relations, etc.? How are you utilising your own channels (website, LinkedIn, video) and third-party channels to present to the market?

2. Around half of LP commitments YTD have been allocated to mega-funds, and around two-thirds have gone to funds that are in their fifth iteration or later in the fund family.

Our take for PE firms: If you are an emerging manager with perhaps one of your first funds, or even an established manager launching a specialist fund, how are you differentiating to both the LP and management team audience? Do you have a strategy in place to target specific geographies or industries with relevant and timely commentary that will rise above that of the more established players? Your competitive advantage is the ability to act more nimbly and be seen as hyper-experts, so does your communications strategy play to those strengths?

3. Exit values through Q3 continue to skyrocket.

Our take for PE firms: Understanding that value creation strategies during hold periods are often well-guarded secrets, are you – within reason – communicating key points of how you worked with management to grow the company’s value during your partnership? How are you ensuring that your existing and potential LPs understand you added value rather than just being opportunists in a growing market? These communications initiatives – whether they are well-crafted quotes in an exit press release or a more involved campaign – will increase loyalty and enthusiasm for future partnerships from LPs and management teams alike.

Jeff Segvich

With nearly 20 years’ background in PR and communications in both the UK and US, Jeff brings a wealth of experience and commercial sense to helping businesses and organisations of all sizes achieve their business objectives through strategic communications programmes. Read more...