Platform Models Can Be a Tailwind to Private Equity Asset Raising

The private equity industry, like most others in the alternative investment space, is enduring a difficult 2023, with both fundraising and deal activity down when compared to last year. Higher interest rates are a significant driver of impact, with investors able to source higher-yielding liquid investments hurting the former, and more expensive loans impacting the latter.

Consequently, some independent sponsors who were planning on launching a debut fund this year are staying on the sidelines, nervous about pulling the trigger due to the perceived risk of incurring the costs of a fund launch when the outlook for fundraising is grim.

But there are options for de-risking a new fund launch, including the use of a platform provider. This option is gaining in popularity, driven by two well-known benefits, and a third, less well-known, but arguably just as important.

The first is the lower costs that platform providers can offer. These firms tend to charge a flat fee, usually on a basis points of AUM model, and for that, the manager gets the main middle and back-office support they would expect – namely, legal, accounting/audit/tax, and fund administration – at a significantly lower cost than they would if they sourced these services independently.

Convenience is the second. Platforms provide one point of contact, reducing the administrative burden on the GP of juggling multiple service provider relationships.

But the less well-known benefit comes with the asset raising function itself. The private equity space has never been more competitive, so GPs raising assets for a first-time fund means that they are not only competing with higher yielding, liquid markets products, but a raft of funds that will likely offer something similar to the GP, whether that’s exposure at the industry, region or size level, or something else.

Working with a platform provider means that the GP is sharing the risk. The platform provider has multiple employees and hundreds of millions of dollars under management across all of the funds under its umbrella. In a world where counterparty risk has returned to front and center of an institutional investor’s decision-making process, ‘institutionalising’ your fund from day one becomes a more attractive option for investors.

Don’t get me wrong. I know that it’s more difficult raising money for a private equity fund now than it has been in a while. But a platform approach not only saves you time and money; it can help you raise it.

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Gregory Poapst is a Managing Partner at Fundviews Capital. Connect with him on LinkedIn here.

Fundviews Capital is a full-service end-to-end Fund Management Platform.  Our platform provides a complete end-to-end solution for asset managers or wealth managers to structure, launch, operate and grow their professional investment funds. You can launch a fund in a matter of weeks, not months, and with minimal capital outlay – not only reducing the risk of launching a fund but also maximizing your chance of success.  Once launched, you will find that a dedicated team of professionals is just a phone call or email away at all times, handling all aspects of the back and middle office for your fund.