Last week, Adveq hosted a press luncheon that featured Adveq professionals and members of the media taking turns predicting what big trends will take place in the industry in 2016.
Four of the 14 people attending said the sector will see a continuation or an increase in LPs co-investing and direct investing, and a few of them voiced expectations for a further spike in dry powder and another record year of fundraising.
Recently fund advisory Triago noted in its quarterly report that shadow capital – which consists of co-investments, direct investments and separate accounts – jumped 90 percent to $127 billion in 2014 from a peak amount seen in 2008.
The Private Equity Growth Capital Council released a trend report in November noting that dry powder for global buyout funds rested at $486 billion in the third quarter, an increase from the $448 billion at the end of 2014.
Other predictions made at the table included smaller LPs entering private equity, perhaps in light of retail investment vehicles such as the one that AMG and Pantheon launched this fall; variations in the traditional private equity fund structure, such as a shift away from the classic 2-20 model; and a different life length of a fund.
Advent International recently launched its eighth flagship mega buyout fund, Advent Global Private Equity VIII, without a hurdle rate and a 1.5 percent fee on committed capital from LPs rather than the traditional 2 percent.
Many speculated that cybersecurity would continue to be a key concern – the US Securities and Exchange Commission is expected to launch a second cybersecurity sweep in the coming days or weeks – and a few predicted LPs would take more interest in venture capital funds in 2016.
As a way of gauging people’s prediction abilities, the luncheon reviewed predictions for 2015, which included peak fundraising levels, more innovative fund structures, and greater regulatory challenges – which many agreed had proven true in 2015.