Greetings offshorefundsblog readers. Phil and I have just returned from attending the inaugural Cap Intro West Conference in San Francisco last week. We were both honoured to be invited to speak at the conference: I joined a number of friends presenting a Private Equity and Hedge Fund Boot Camp for start up and emerging fund managers while Phil, somehow, managed to have the audience in stitches while he detailed the ins and outs of AIFMD on his panel on Navigating Fund Marketing Rules and Regulations.
As you might expect at a January conference, a lot of time was spent during the breakouts looking at the tea leaves to determine what 2017 might hold for us. I am very pleased to report that the mood was generally optimistic. Some of this may have due to the Trump administration’s intended policies to boost the US economy and some of this may have been due to the generous pours of the bar staff at the evening cocktails!
In all seriousness, the statement that stuck with me the most during the conference was that studies had shown that the strongest performance of most fund managers is during their first three years of existence. This may seem like a no-brainer to some of us but I hope that this strikes a chord with readers who stumble onto our humble blog while researching the ins and outs (and what-have-yous!) of starting up a fund. There is demand for start up and emerging managers and there is good reason for such demand. As my friend Paul Marino noted in his opening remarks before our Boot Camp panel Preqin data shows that:
- at present, 51% of LPs will invest, or consider investing, in a first-time private capital fund in 2016, a 12 percentage point increase from 2013. In addition to an increased willingness to commit to or consider first-time funds, 11% of LPs claim they would invest in spin-off firms, up from 6% in 2013
- first-time funds not only deliver returns comparable to established GPs, but many times they outperform experienced managers
- covering a span across 13 vintage years (2000-2012), and comparing median net IRRs of first-time funds against those of established fund managers, 2004 is the only vintage year in which non-first-time funds have outperformed first-time funds
My fellow blogger Phil Graham on his panel at Cap Intro West