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Lifeblood liaisons

Lifeblood liaisons 2008-05-01 Staff Writer One hears much these days about how things are different in the deal market. For starters, debt is more expensive, less available, and if you do get any it's not nearly as sponsor-friendly. Returns will not come from financial engineering but from hard work on the o

One hears much these days about how things are different in the deal market. For starters, debt is more expensive, less available, and if you do get any it's not nearly as sponsor-friendly. Returns will not come from financial engineering but from hard work on the operations level. Transactions of all kinds will take more time and be more painful to complete.

But what about the fundraising side of the business? While the deal market has ground almost to a halt in most corners of the private equity market, fundraising has continued to boom. At press time, our sister publication Private Equity International was putting the finishing touches on this year's PEI 50, our ranking of private equity firms by size, which found that together the largest 50 private equity firms in the world have raised $810 billion over the past five years, a 47 percent increase over the fiveyear fundraising total raised by the PEI 50 this time last year.

We know this step change in fundraising comes amid increasing allocations around the world to private equity, as well as new LPs entering the asset class in the hopes of recreating the success enjoyed by long-time backers of private equity, like the Yale endowment. This doesn't mean easy fundraising for IR professionals at established firms, but it can at least be said that the wind is at their backs.

We hope you find this May issue of PEI Manager to be valuable if you wonder, as we do, how long this benign wind will continue. Although the most sophisticated LPs today are happy to continue investing through a downturn, some market observers wonder whether a market swoon, mixed with bad news coming out of some high-profile private equity portfolios, will at least temporarily put the brakes on LP commitments, making the jobs of fundraising professionals much harder.

LP commitments are the lifeblood of private equity, and if the commitments aren't forthcoming from your established investors, you'll have to broaden your base. That means crossing the Atlantic, and increasingly it means going to new pockets of wealth, such as Australia and throughout the Middle East, where new relationships can be won, but not without a great deal of time, energy, and attention to the suggestions put forth in this issue of PEI Manager.

Regards,

By David SnowDavid.s@peimedia.com