From Coast to Coast: LP Perspectives on Private Equity
Last month, Monument Group hosted events in Los Angeles and New York, bringing together more than 150 private equity professionals, including LPs, GPs, and independent sponsors.
Across both gatherings, one theme stood out: LPs continue to deploy capital but are being highly selective given liquidity constraints.
- State of Play
A More Selective Approach to Capital – LPs remain committed to private equity but are taking a more targeted approach to new commitments. While some investors, particularly family offices, are still building their programs, more established LPs are focused on refining existing exposures.
Secondaries as a Portfolio Management Tool – Secondaries are increasingly important in that process, allowing LPs to exit legacy positions, rebalance portfolios, and redirect capital toward managers and strategies that better fit their objectives.
- Sectors of Interest
Continued Interest in the Lower Middle Market – The lower middle market remains attractive across growth equity and buyout strategies, with LPs drawn to managers that can acquire businesses at reasonable valuations and drive meaningful growth and value add.
Evolving Sector Preferences – Industrials and healthcare continue to garner interest, while technology is being evaluated through a more nuanced lens. As AI reshapes the landscape, LPs are distinguishing between businesses vulnerable to disruption and those positioned to use the technology to strengthen their competitive advantage.
- New Manager Relationships
LPs remain open to new managers, including spinouts and first-time funds, but differentiation is critical. Investors are prioritizing experienced teams with a clear “right to win,” differentiated sourcing capabilities, a credible plan to create value and strong track records. Seeded portfolios are also a differentiator.
- Co-Investment and Independent Sponsors
Co-investments are becoming an increasingly important part of LP portfolios, offering opportunities to gain targeted exposure to attractive assets while potentially lowering overall fees. As more LPs build direct investment capabilities, independent sponsors represent another avenue for investors to gain specific industry exposure and are attracting an increasing amount of capital.
- Implications for GPs
LP capital remains available, but fundraising requires greater patience and a sharper investment case. Managers that clearly articulate their competitive edge and present a credible path to value creation will be best positioned to stand out.
