In recent years, new general partners (GPs) have increasingly entered the private equity (PE) space—making the fundraising landscape overcrowded and more competitive than ever before. These emerging managers—meaning GPs raising institutional funds I, II or III—face two immediate hurdles: Limited partners (LPs) are decreasing their number of GP relationships while committing larger sums of capital to fewer funds, and differentiation from peers is paramount to success. As a result, these new managers are often avoided or overlooked.
In this piece, Barings challenges some of the common assumptions held by investors. Namely, that larger and more established funds are the safest bet and generate higher returns; that women and diverse managers compromise performance; and that PE markets are cash-heavy and overheated. In reality, emerging managers typically deliver higher returns to investors—with women and diverse managers topping the list, in many cases—and PE markets have seen record levels of inflows in recent years.
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