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The Institutional Limited Partner’s Association (ILPA) held its third annual Europe Summit in London April 26-27. Held in-person for the first time since early 2020, LPs and GPs gathered to hear from industry leaders on an array of timely trends affecting the private market investing world. Across two days of keynote sessions, our Allvue team in attendance highlighted a few key themes.
As the private markets quickly became a staple in the average LP’s portfolio over the past decade, many investors worked hard to scale up to their goal allocations. However, amid volatility in the public markets as of late, many LPs are feeling a renewed drive to invest more in private capital and/or further diversify their private portfolios across different asset classes. As they further scale up their private investment allocations and broaden the private capital asset classes they take part in, LPs can count on the management and servicing of these assets to become more complex.
Even as many LPs are flocking to the private markets after seeing disappointing immediate returns in the public markets, many believe that we’ve seen the alternative investments industry peak after more than a decade of exciting growth.
The private markets have delivered returns for the majority of the last 15 years, and as the industry of LPs buzzed from the excitement of the asset class, more managers and funds launched to fill the demand. But these days, there is fierce competition among GPs to nab the best deals for their investors, and not all market participants will get a piece of the most successful ones. Even if the outsized returns may settle down over the coming years, it cannot be denied that alternatives are a fundamental portion of the average LP’s portfolio and will continue to serve as an essential asset class for creating the returns they need.
LPs understand the next level of growth involves investing in a solution that will enhance their management of their private market investments. However, many are not at the point where it is a compelling reason to make the change and take on a software implementation, preferring instead to continue using Excel and working around the inconveniences.
As the industry matures and LPs shape private investments into a larger and larger piece of their overall portfolios, new pain points continue to emerge and drive conversation around how to tackle fresh challenges. For example, ESG due diligence is a major consideration for LPs – particularly in Europe under regulatory requirements – as they explore how best to collect, analyze and report on their data. And as private allocations grow for most LPs, utilizing pacing models to visualize their future cashflows has become increasingly vexing.
Technology is the answer to these struggles, and as the resulting operational conflict grows harder to stomach, LPs become more willing to consider adopting new tools to help their teams work more efficiently and make stronger decisions for their portfolios.
Conversations coming out of the ILPA Europe Summit indicate that while institutional investors are becoming ever more comfortable with and expert at investing in the private markets, there are always pain points or markets trends ahead that require them to problem-solve.
From ESG benchmarking to cashflow pacing to deal pipeline monitoring and beyond, LPs will need a solution to help perform front-, middle-, and back-office activities within a single unified environment.
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