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Fundraising Is in Early Stages of Recovery, Marco Masotti Tells Private Equity International

May 28, 2024

In an extensive interview with Private Equity International, Investment Funds Group Global Co-Head Marco Masotti discussed the findings of Paul, Weiss’s latest Investment Funds Group survey of over 50 recent top-of-the-market private equity funds with minimum targets of $2.5 billion.

In the article, “GPs hope to lure LPs with fee discounts and longer offering periods,” published on May 28, Marco explains how the continued LP-favorable fundraising environment has put pressure on GPs to increasingly offer management fee discounts, extend fund offering periods and provide flexibility on recycling provisions. Some 38% of GPs offered early bird discounts on management fees in 2023, significantly up from 18% in the previous year, according to the study.

While Marco expects these discounts to continue in the near future, “there are only a limited universe of discounts that can be offered – such as early bird, size and loyalty – and we could see more of an impact on the real fee rates charged by LPs,” he says.

Despite GPs’ current fundraising difficulties, Marco believes “we are in the early stages of a recovery in the fundraising market,” noting that “GPs are increasingly finding ways to provide liquidity to LPs, allowing them to recommit the dollars to new funds.” He also notes that Paul, Weiss has seen early signs of recovery thanks to an uptick in dealmaking and sustained investor appetite for private equity.

There also seems to be a renewed positivity among GPs and LPs, Marco adds. “LPs are more engaged and willing to commit,” he says. “They needed some breathing room, but they are ultimately in the business of making allocations.”

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