Former LP reflects on changing industry

Bruce Feldman, the long-time head of the alternative investments programme at the $27.6 billion Pennsylvania State Employees’ Retirement System, knows full well the growing divide in the limited partner community.

One of the more significant changes he saw in the industry during his time at the system was the gradual divergence of certain limited partners from the rest of the pack, separated by their ability to get favourable treatment from general partners not available to other investors.

“The ability to influence the terms of the transaction changed. Money always talked, but [it used to be], the earlier one could get involved with the GP … the more influence you would expect to have,” Feldman said during a recent conversation with Private Equity International.

“The longer I did the job, the more I realised the industry evolved. Key LPs emerged who were much more influential in how the partnership was structured. In many cases they were able to negotiate more favourable arrangements for themselves, for example, in side vehicles or other arrangements,” Feldman said.

Bruce Feldman

Feldman’s observation reflects a growing tension among LPs over the issue of big investors having access to better terms and conditions, co-investment opportunities and even separate accounts customised specifically for them.

Mario Giannini, chief executive officer of Hamilton Lane, defined the issue earlier this year during an industry conference as a “fragmentation” of the LP community. “It’s something we’ll all have to watch – what was formerly a fairly unified LP community fragmenting into how they want to invest in private equity,” Giannini said at the time.

However, Feldman did not necessarily think it was a bad thing that certain investors were afforded advantageous opportunities – it was just the way business worked. “That’s kind of the way it is. I don’t know that it’s a bogeyman, but people need to be aware of it,” Feldman said.

These days, Feldman works as an investment advisor at Health Evolution Partners, which he joined in January, according to a statement from the firm.