General partners are facing increasing pressure to invest more of their own capital in their firm's next fund, but the majority are unable or unwilling to increase their personal stake.
According to new research from Investec Fund Finance, over 81 per cent of GPs surveyed believe there is an expectation among LPs they should be investing more into the next fund. However, 35 per cent of the respondents are unable to do so as they cannot access sufficient finance. Other reasons for an unwillingness to commit are a reluctance to be overexposed in a single investment, with 25 per cent of those surveyed citing this, and already having committed the maximum allowed for their level in the firm (18 per cent).
On average GPs are planning to personally invest around £200,000 (€317,137). Over a third of respondents plan to invest between £100,000 and £500,000, ten per cent between £500,000 and £1m and a further ten per cent in excess of £1m. Around eight per cent said they will not invest in the next fund.
“LPs are increasingly looking for GPs’ interests to be more closely aligned with their own through a more significant investment into their own funds. We have recently seen GP commitments of over ten per cent in certain funds, which has proven extremely popular with investors. However, our research shows that almost four-fifths of GPs are unable or unwilling to invest any more,” commented Simon Hamilton of Investec.