17Capital is a leading provider of finance and liquidity to the private equity industry. Here we discuss the liquidity options currently available for managers, new market developments and the benefits of a recapitalisation with 17Capital.
The global private equity industry has outperformed liquid public markets by 750bps over the last 20 years1. From 2011 to 2015 the trend of net distributions to limited partners increased significantly as pre-crisis funds recovered, and capital call facilities gained popularity. However, since 2015, net distributions to investors actually decreased by ~65%2.
By using this finance, you can invest 100 percent of a fund, which gives the GP an advantage
As the pace of distributions decrease and investors once again become fully allocated to the asset class, investor liquidity has gained even more focus on which managers are being benchmarked. Meanwhile, in a competitive market, managers can find it challenging to source new investments which are as compelling as the assets they are selling. While asset sales and company dividend recaps have remained the main source of investor liquidity, the secondary market has provided additional tools. Managers now have options to hold assets longer through innovations like continuation funds, strip sales, partial exits and single asset funds. However, a portfolio-level dividend recap with 17Capital is an alternative to the secondary options with some specific benefits.
- Cambridge Associates Private Investments Database
- Bain & Company – Global Private Equity Report 2019
Although not exhaustive, we highlight three key advantages of a dividend recapitalisation:
Finding new Investment opportunities and generating liquidity remain some of the key challenges faced by private equity managers. The secondary market has provided additional tools but aligning all stakeholders in these transactions can be challenging.
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