Fundraising Outlook 2013

This is a transcript of the December 13 Privcap webinar, “Fundraising Outlook 2013.” The expert discussion included Mounir Guen, Founder and CEO of MVision Private Equity Advisers, John Crocker, a Managing Director at Deutsche Bank and Privcap Co-Founder David Snow. The webinar is now available on playback here.

David Snow, Privcap: Hello, and welcome to Privcap. This is David Snow, CEO of Privcap. You are listening to a Privcap webinar. The title of our webinar today is “Fundraising Outlook 2013.” We have a couple of fundraising experts and veterans of the world of LPs and private equity funds: Moose Guen of MVision and John Crocker of Deutsche Bank. I will be introducing them shortly.

First, I’d like to give you a sense of what to expect during the next 45 minutes. We will be delivering to you very valuable market intelligence about the fundraising landscape for private equity in 2013.

We will first have a very brief statistical overview of what the market looks like right now. That will be followed by an expert conversation between Moose and John about tips for success in the coming year, and also challenges that lay ahead. Very importantly, we want questions from you, the audience. The questions that you submit to us via your webinar console are anonymous, so please be candid and ask any questions that you would like to Moose and John.

We will pick questions to answer and we will not say your name, unless you ask us to. Most of the questions will be dealt with at the end. However, if there is a question in the meantime, please submit it and maybe we’ll get to it in the course of our conversation.

Without further ado, I would like to ask our two experts to briefly introduce themselves. And why don’t we start with Moose Guen, the founder of MVision.

Moniur Guen, MVision: Thank you for that, David. And hello,  John. It’s always a pleasure working with you.  MVision was founded over 11 years ago. We have offices in Hong Kong, London, and New York, over 60 people working.

On average, we seek to do, I would say, four to six European funds a year, ranging from small cap turnaround to larger buyout to megafund. We would look in this particular marketplace, slightly more in the United States, so let’s say six, seven. In the rest of world, 10 to 12. So within that we would have – on top of that, I should say – one or two real assets and two or three real estate.

It’s a nice diversified book of business. It’s extremely global. We have been able to raise up to $20, $25, $30 billion a year in private equity capital from a variety of institutional accredited investors around the world.

Snow: Thank you, Moose. And John, can you tell us a bit about yourself and what you do for Deutsche Bank?

John Crocker, Deutsche Bank: I’ve spent the last 25 years focused on private equity as both a fundraiser and an investor. I’m currently at Deutsche Bank. Deutsche Bank’s asset management business manages over 80 billion in AUMs focused across the alternative/private markets asset classes. And I’m active in both fundraising and product development.

Snow: Great. Well, let’s begin with a very quick overview of what the fundraising market looks like, at least from a statistical point of view. These are not numbers that are going to be new to anyone. Obviously private equity fundraising reached a peak in 2007 during the golden era, and fell precipitously after 2008 for reasons that are known to many. But we’re going to dissect that into a bit further detail here.

If you look in a bit more detail all the way up to 2012, or at least the third quarter of 2012, you see that unfortunately it looks like 2012 is not going to be any better than the prior two years, which have been pretty weak as far as overall fundraising numbers. I’d like to start perhaps with a question for Moose and then we can get a conversation kicked off.

Can you give us a bit more context about why it is that the capital remains scarce today? And what is driving that scarcity? And how do you think it will affect the ability of fund managers or hopeful fund managers in 2013 to raise capital?

Guen: Thank you, David. One has to go back to the days where John and I– you know, we’re both 20-year plus veterans in the industry. When institutional investors were at 0% to 3% allocation of total assets to alternatives, that’s total alternatives. And in the progress up to the mid-2000s– I think peaking at 2007 when we look at your pretty chart here, David– those programs went up to 20%. And not only were we growing in terms of cash within these institutional pension plans, but also the number of investors around the globe were growing in number, which then proliferated the number of general partners and created the concept of the megafund and the mega-investor.

When we come in to today’s marketplace, I just don’t see this type of capital being made available or forming itself. If anything, there is very limited new capital in the marketplace. Limited not necessarily in headcount but in volume of capital available.

The mature programs are all going through periods of re-consolidation and repositioning. So what we’re seeing is people that are at 15% or 20% total allocation because the denominator effect might be at 22% or might be at 16%. So the desire to put capital to work is at its limit.

What they’re doing in today’s market is they’ve realized, after 15 years or 20 year programs, they have 90 relationships. They want 50, maybe 60 relationships. They want to have a balance between US, Europe, and new or emerging markets, depending on what their program would like to be positioned as. They want to be positioned in areas where there is very good, experienced general partners, and areas that have a growth associated and economic dynamic of growth associated with them.

They are more hesitant and more selective in various categories of general partners. So at the large end of the market, i.e. funds above $3.5 billion, they will do a certain number of them. Where in the past they might do five or six, they might do two. If they’re lucky, maybe three.

Remember, this is within a context of reducing general relationships and also globally diversifying the portfolio, which means that the amount of available capital becomes extremely limited, number one. Number two, it’s not fresh. It’s recycled, which means that once the program has restructured itself, we could actually have even more difficult numbers in the years to come. Because once the program is restructured, it takes three to five years for them to start seeing whether it’s working or not, i.e. one or two generations of a fund coming to market from the general partners that they’ve newly selected.

At that point, what can be new, what can be changed? Most of the growth, I would imagine, and that’s why for us we have all these clients around the world in new and emerging markets, is that that’s an area of growth. That’s an area where we don’t have enough experienced general partners. It’s a more limited sample base.

There’s an opportunity of growth of capital in the restructuring and repositioning, and an opportunity of creating some new groups. So when you look at, for example, our platform at this time or in 2012 in Asia, for example, we will have been associated with six funds, four of which we would have helped create as first-time funds. And that’s a pretty remarkable statistic.

In Latin America,  three, of which two we were associated with as being first-time funds. We will continue to do that. So the area of interest for the investors are smaller funds, highly experienced general partners in US and Europe, a little bit more tilted towards the US. Europe is a little bit more out of favor, I should say, or less favorable. And then a desire to effectively pick up emerging markets where Pan-Asia, China, in a new market context, Australia, Latin America, regional, Brazil, Colombia, Peru, Chile, as a quadrant, Mexico.

Ultimately, I would imagine later next year, Africa would come into focus a bit. The Middle East has a little bit of geopolitical tension. Turkey is a very appreciated country and a country that recently had a very good run in private equity. And then, interestingly enough, Russia is a little bit in the background there still, even though it has some very good opportunities at this time, in terms of just general.

So that’s some of the big trends. So if anything, I would expect not to see an increase like we had in your charts. I’d see almost a flat line going forward.

Snow: John Crocker, you just got back from three weeks of traveling the world and speaking to investors. What did they tell you? And based on what they told you, what do you predict for the fundraising chart for 2013? Will it, as Moose predicted, look pretty much like 2010, ’11, and ’12? Or will it be at a different level?

Crocker: Yeah, I think many of the points that Moose brought up I heard from investors as I’ve traveled around over the last couple of weeks. I might be just a bit more optimistic that you will see– well, I think one of the big issues outstanding is obviously the fiscal cliff. And if we fall off that without resolution, then anything I say is off the table.

Snow: Were non-US investors talking about the fiscal cliff?

Crocker: I think it raises concerns that if the US can’t get its act in order, what’s the implication for global economic growth? But, in general, there are some positive trends out there. That doesn’t mean there’s going to be a flood of new money.

A couple of things just to note is, at least until very recently, distributions were above capital calls. And for the period from 2007 to 2010, it was the other way around. And obviously if you look back at what drove the market in the last ’04 to ’07 period, a significant amount of that wasn’t necessarily new allocation. Part of it was new applications or increased allocations to private equity. But a lot of that was just driven by the fact that you had a very rapid return of capital. And so people plowed their money back in.

By and large, if you look at the growth in the marketplace, the bulk of that money went into the top 20 or 30 largest private equity groups around the globe, i.e., as Moose highlighted, the birth of the megafund. So everybody’s going through a rationalization process. They want to see distributions.

You do have a couple of other trends that have to be taken into account. Many of the pension funds are defined benefit plans in the US, which is historically the driver for capital into the private equity industry, or dealing with a situation where they’ve got huge pension liabilities, i.e. the pension gap. They’re under political pressure to reduce their return assumptions. The fight in California over that sort of highlights the dynamic tension between reality and politics and because of that, the search for alpha is there.

Now I do agree, most of them realize they can’t manage humongous numbers of relationships. Whether they just concentrate, that would imply the rebirth of the mega alternative asset manager, or go back to leveraging outside vendors to help create some greater diversity, I’m not sure. Countering that balance, though, is also a longer term threat that you increasingly see the defined benefit plans in the United States for either new workers or convert into defined contribution. That may have an impact, which points to the emergence of investors overseas.

We all are hoping many of those investors will come online faster than they may. They’re all moving slowly. But it’s important to look around the globe for the pockets of money and the ability for those pockets of money to increase allocations over time if you’re in the fundraising world.

Guen: Yeah, but I think, John, the one thing about that– because we know that they’re in Peru and Colombia and Chile — that there are some pensions. There are articles being written about the Chinese Life companies coming to market. There are pockets. But one of the trends that we’ve noticed is that those pockets very quickly become gate kept.

If you are raising capital, the gatekeepers will have influence. The gatekeeper who is covering the municipals in Texas and the state pensions in Arizona is the one that’s going to be covering– I’m making this up in this example– the Peruvian pension plan. And so if you’re raising capital in the United States, or raising capital in Europe, or even in Asia, knowing that this new capital that’s come online is building its program. So it’ll probably do five US mid-market funds, four European funds, two Asian, some construct. You know that that gatekeeper has got that capital.

One of the phenomena for the listeners on the webinar is if you are a general partner and you are thinking of coming to market, try to go for the money as soon as you humanly can. Because if you do have competition in your space, and one of the things we’ve noticed is a very recent phenomenon, is because the investors are selecting a lower number, a lower headcount. The result is if your competitor goes first and takes the money, it’s gone.

It’s not like, in 2012 your competitor got the money, so in 2013 you can get it because in the following year they’ll do another one or two groups in your space. They don’t. Again, that goes to the point that they’re looking for less relationships.

One point that we also forgot to mention is the mega-investor. We did the study about a year ago where there were 100 investors that could write over 100 million tickets around the globe, of which there was a good number that could do two or three times that, if not five times that. And today when we look at the current megafunds that are closing, they have an overlap of the same 20 that’s quite remarkable.

But we know that those 20 aren’t going to do all of them. You see what I’m saying? And so the larger the fund, the more it has to go find the capital in these other or new areas. The smaller the fund, the more it can find alternative ways of accessing the capital. But the capital available can potentially be a smaller number for those involved.

Snow: Moose, it sounds like you’re saying that basically pre-marketing begins now, that if you’re thinking of doing your next fundraiser, actually you should be aggressively going out to investors basically right away.

Guen: Well, you raise an interesting point here. Because one of the points that I have to make– and I don’t know what controversy this is going to cause– is that it’s almost simpler to work with a spin-out first-time fund, where you can’t necessarily use the prior track record and you’re working with a potential investor or two that they’ve just targeted or have an LOI on and work with the story and what the potential of the team is than necessarily working with a 20-year-old general partner who has that experience but has had three team turnovers, has had six 0’s in their portfolios that are now going to be detailed, scrutinized, and assessed, where they’ll assess how they invested post ’09, ’10, ’11, ’12, compared to how they invested in ’06, ’07, ’08. And all of a sudden you find that you’re just completely, completely overwhelmed by a tsunami of requests and checks and rechecks and counter checks and then comparative checks that are made.

Snow: While you’re taking all your time talking about what happened in 2003, the newer group comes by and swipes the money from your intended LP.

Guen: Because the LP is sitting there. And they’re like, what am I going to do? And I’ve had these headaches. How am I going to present this to the board? How do I write this up on the report?

Your champion starts getting a bit swamped, if not drowned. And in comes a cleaner, fresh story. It’s simple. It can be written up a much clearer away. And so, like I said earlier, we’re finding that in the last 12 months, we’ve actually had a lot more success with first-time funds or funds that we had created not too long ago than with the very established groups. And be careful if you hit the $3.5 billion plus number that you’re looking to raise.

Now within this, there’s always exceptions. There was a fund in Europe that did extremely well at the large end. There’s a fund in the United States that right now is in the current market that looks like it’s going to hit its target at the large end. Big numbers, huh?

But they basically, in my view– remember I mentioned to you the 20 mega-investors? What happened is that these funds benefited from getting the full 20 at their full numbers. So if today’s full number for these guys is 300 to 350 multiplied by 20, boom, you can see your $6, $7 billion. Then you just get a few other investors, and you can get to $8, $9 billion. But you start seeing how the numbers work.

Crocker: It’s interesting that some of those investors, those big investors– one sovereign wealth fund I had dinner with the other night was saying, well, we’re coming to a point that if we can find either a team within a team or just a team that doesn’t want to play the game of fundraising, why don’t we just set up an operation where we’re the sole LP? They basically get better economics because they don’t have to share it. And we can go through a fine-toothed comb to determine which teams are right, and have more governance, more control.

A number of the next generation investment teams and some of the bigger places seem to be at least willing to have conversations with them about that.

Snow: John, what’s interesting about what both you and Moose have been saying, Moose talking about how first-time funds actually have a fair shake in today’s market and also your comment about the sovereign wealth fund looking for talent, there’s a huge premium placed on experienced private equity investors that sounds like it’s equal to just the experienced GP team in its current setup.

Crocker: Look, I think a lot of investors are looking out there and seeing established brand names. If they do the math, they realize the guys who head the place are starting to get to an age where there is going to have to be generational change. Some groups have dealt with that. Others might say, hey, I don’t want to go. If in the next 10 years that’s going to shake up the firm and there’s always winners and losers whether right or wrong, that means part of that team might likely end up leaving, maybe it’s worth taking a bet on a first-time fund where I see hungrier people who need to make money who want to build their own franchise.

Guen: But I think, to John’s point, we’re seeing a reticence from the investors on succession. Where in the past, the investors have said, hey, John, how soon can you get out of here and who’s going to replace you? Today they’re like, John, you’ve got how much, 25 years of experience? Can you please stick around? Then how does everybody else contribute to the equation?

The dynamic on the team is very much focused on ensuring that the experience is there to protect the capital. Because one of the things we haven’t touched on is that the return profile and the net return profile is actually lower than it was five years ago. And it’s interesting because, to John’s point, in 2012 the amount of capital returned has been outstanding by the industry. But the limited partners aren’t giving it back to the general partners that gave it to them, which is what we used to see in the early 2000s.

I’d give you $5 billion in cash back in 2012. And all of you very kind investors will give me back the $5 billion. And at that would form my first close, at which point I would then raise a couple billion more, announce $7 and 1/2 billion and a huge success. And we’re just not seeing that dynamic take place. And instead what the investor is doing is saying thanks for the cash. I’m not too sure about you anymore.

Well, we’ll see, we’ll see. It all depends on the construct of their risk profile and the return profile. But what they are looking for is they’re looking for a safer pair of hands. They’re looking for a general partner with tenacity, somebody who really cares, somebody who can work through problems, doesn’t like losing money.

That’s why how they compare the general partners in terms of how many much volatility do you have in your portfolio? That’s become a very, very common question. Again, if you’re 20 years old and your first fund was an experience, you might have five losses in there and then one company at 100 times money, they don’t like that. They want to make sure that that doesn’t crop up today.

Snow: John, I’d like to use the US middle market as sort of a case study in some of these trends that you’re talking about. We have a very good question in from someone in the audience asking about what can middle market funds in the US do to differentiate themselves. I’m sure a lot of GPs are looking around and asking, will I be among the chosen few that gets selected for a re-up or that makes that shorter list of GPs?

Specifically within the US middle market, who’s going to win? What attributes do the GPs have that are going to be able to raise that next fund? Does it include, as you say, Moose, the low volatility? Are there other attributes that really loom large for the groups that will win?

Crocker: When I look at the middle market funds, the differentiators that I’m looking for is true proof that that team has been able to go in on an operational basis and improve and create value. If you assume a slow growth environment, that’s where the money’s going to be made. Obviously you’ve got to buy right, you’ve got to sell right, you’ve got to structure it right.

But those groups that can go in, get their hands dirty, and work with managements to create value on the operating side is, I think, one of the most important areas that we would be looking for right now. In terms of do they need to be focused or specialized, I think just being a general middle market buyout fund raises a lot of questions these days, just because of the desire to have gaps in expertise as well as having a network in a particular sector or industry. So people are looking for that.

However, that doesn’t mean that they want a sole sector focus fund. I think investors vary on that basis. A middle market TMT fund isn’t going to appeal to everybody. A middle market financial services fund may not appeal to everybody. Different investors have different attitudes around that level of specialization.

Guen: Yeah, I think a couple of aspects that I would advise if you’re looking at US middle market, the first is to have clarity of your strategy. The investors are very, very sensitive to anything that they believe is a deviation. So what is your strategy? What is it that you do? And show me that your current pipeline is replicating the strategy that you’ve been speaking about. That within the current pipeline, not only is it a healthy and active one, but that you have insights and understanding of the selection process and the discipline of the acquisition.

Then we want to see that the team has plans, there’s governance that we can track as investors. There has to be very clear, transparent processes, that we can see 100-day plans, that we can see invest memos, that we can see the checks that were done. We can understand which individuals are involved and what it is that they’re seeking to contribute, what are the deliverables, what are the deliverables of management.

Everything has to be transparently tracked so that we can understand that you’re actually working and owning this company responsibly of trying to avoid losses dealing with any shocks to the system in a good way. And ultimately, then performing by generating cash on cash returns, where losses are low, there’s a steady activity of money in and money out. And to the point that John made, I would like to see a bit of specialization, whether it’s consumer products or the certain types of deals, the certain types of skill sets that you focus on. That way if I can fit you better in my portfolio.

Interestingly enough, again, this goes back to the kind of the first-time fund spin-out verses established group. If you deviate from any of the points made and you’re an established group, you’re given a very hard time. If you’re a first-time fund, you, by default, can give them what they like, what’s being sought after, if you see what I’m saying. So it’s a very interesting marketplace at this time.

Snow: We have about 15 minutes left in the webinar. It’s time for some smart questions from the audience. We’ve already been getting some great questions. These are anonymous, so feel free to try and stump our experts.

We have an interesting question here about co-investing. “Many LPs either do or they believe they do want to co-invest and want to make that part of their commitment to a GP firm. Are you hearing a lot of this as you speak to investors, Moose and John? And do these investors understand the work that’s cut out for them if they are, in fact, given many co-investment rights?” Maybe starting with John.

Crocker: Yeah, investors always like the idea of co-investments. If you go and talk to GPs, in general they’ll say 10 LPs said they wanted co-investment. We send them the stuff, and we never hear again from them.

If you’re a newer fund, an interesting way of developing relationships with potential investors, maybe not in the first fund, even though they’re not an investor in your first fund, but show that co-investment opportunity to some investors that you’ve clearly identified as able to do it, able to respond quickly, as a basis for developing a relationship before you go back to market for your next fund. So co-investments are important because people are viewing them as a way of reducing the overall fees. But I think it’s over spoken by many investors, because they just don’t understand or don’t have the true in-house capability to respond to the level of co-investments they make get from their GPs.

Guen: I have a slightly different view to John on this. And I appreciate where he comes from because of the experiences that he’s had. But the first thing we want to go to is the J curve. And it’s not a point that we’ve raised so far or has been asked. Is private equity expensive? Is it an expensive way to invest capital?

The J curve as a nice kind of curve to it. So you can just imagine it’s a really nice half crescent of a moon, if you like. We’re looking great, because there are some costs. But the returns more than compensate for that. The timeline of that cash flow is manageable and actually very good for the portfolio. Because one of the aspects of alternatives is always seeking out performance of the other portfolio asset classes.

Now what happens is if that J curve starts flattening out and looks like a hockey stick, so you’ve got this long straight line and then this little bar up at the side at the end, we’ve got ourselves a dilemma. Because first of all, the cost of the asset class are really quite expensive. And second, the return that then comes back is so far away and so little, it doesn’t compensate for that.

So what we found is that the larger pools of capital, the larger investors, want to dynamically manage this. One of the things that’s important and key for them to do that is to start doing co-invest. If I’m going to give you $200 million, I want to do $200 million co-invest.

Automatically the cost aspect of the money that’s at work alters dramatically. And the shape of the J curve can then take that shape of that crescent that we started off in the example with. And to do that, like John mentioned, they realized that they needed to strengthen their internal resources, which then meant that they’ve gone on restructuring and hiring.

If you look now, there is a huge amount of names of investors who have quite large internal direct teams, or teams that can manage co-invest. That is transforming the nature of the larger funds. Because basically we saw this with a client that we had advised who could not reach their target. So basically they were half the size that they were or targeting to be, right? Half.

What they did, which was very interesting, they leveraged this co-invest focus of these particular investors who were building the programs up and put in place– this is the first I’ve seen this– an equity markets syndication type desk. So they had a deal partner. And then they had a couple of guys they had hired from some investment bank, or a bank, who then just hit the phones all the time and worked that list.

They’ve been able to actually get this to work. They’ve been able to get themselves to make the types of investments that they had been making since before and not have to rebuild or reposition their business into much smaller deals, which they’re not comfortable with. So something’s happening with co-invest.

Snow: We have a very interesting question in about what happens to a firm that maybe has a problematic track record but still has many remaining assets left in the portfolio. How can such a firm keep going, at least to retain a team and perhaps dispose of the assets, despite what will probably be a challenging fundraising environment for that team? Maybe we can switch to speed round, because we only have a few minutes left. But John, what are the options for a team like that?

Crocker: Well, basically to call it quits, to have the junior people leave. I think that the level of problematic is the question mark. And I think people are defining a category of fund managers as zombie funds, meaning largely due to problematic portfolios, it’s unlikely they’ll have the window of opportunity to change those portfolios around. And receptivity in the LP marketplace in support for another fund are simply not there.

I think, in my opinion, what investors need to do is have easier options dealing with situations like that, because it becomes in the interest of the senior partners to keep that portfolio in their bailiwick as long as possible while they continue to get management fees—i.e., they know they’re not going to get carried. They know they’re not going to get a new find off the ground. So a lot of investors are dealing with GPs in their portfolios in that dilemma.

Guen: But what I’m seeing is if you look, there were two men that were two general partners in the United States in 2012 where secondary funds played a vital role in restructuring them to give them a lifeline. One of the things that I think is going to happen, Rubenstein says there’s 10,000 general partners out there in one of his public speeches. That’s going to be a lot of zombies.

But some of these people are extremely good people. They should be given another chance. And given the amount of capital that’s been raised for secondaries, I think there’s an active role for that capital to actually give a lifeline and revitalize a few of these people and help reconstruct some of those underlying portfolios, right?

Crocker: I agree. One of the dilemmas in that transformation can be you have a lot of LPs that are groping with these difficult situations. The problem is that the person who made the original commitment may no longer be with that LP, because you’ve had a lot of turnover. And getting consensus among LPs remains a huge challenge, even in the situations where the GP is in extreme difficulty.

Snow: We had a bunch of interesting questions regarding strategy and geography types of funds– emerging markets, venture capital in Europe, oil and gas. This makes me eager to ask a question to both of you. Again, we’re still in speed round. If you could maybe rank what you predict will be the top sector’s strategies, geographies for fundraising in 2013, and then maybe the bottom, setting aside how great the individual GPs are and really focusing more on investor appetites for access to sector strategy geography. How would you rank top one, two versus bottom one, two, three? Maybe starting with Moose.

Guen: This is a very interesting question. To be very frank, unless your portfolio absolutely requires to be built like this, this is not how you invest in private equity. The way you invest in private equity is you try to find the best investment that you can put your money with. And it’s the people– it’s the people.

I don’t care what nationality they are. That’s where you want to be able to back. Because one of the things you’re asking me is what’s popular. Which party should I go to? What drink should I be drinking? It’s relevant. Because I mean, I could be going the wrong party.

Snow: Well, I’m not asking you what investors should do. I’m asking you what you think they will do.

Guen: Well, what will they do? The trend is set. They’re looking for smaller funds. They’re looking for more exposure in new markets.

Latin America will probably be more of a focus area and will gain a little bit on a marginal basis, a little bit more popularity than Asia. Ultimately, a lot of them will explore Africa. Europe will be done with a lot of caution. So it will still continue to be challenging.

Real assets is an area of real focus, so that will have continued growth in it. And real estate comes and goes. There’s certain themes in real estate, like low income housing, or certain themes that are quite popular with capital that they’ll focus on, or certain general partners that they’re very comfortable with.

And then within that concept, there’s exceptions to that trend which are your core holdings. So when an investor believes that a certain general partner, like a recent fund in Europe that was very successful fundraise, is a core holding, then there’s a huge amount of enthusiasm of available capital to partake in it. So the trends are there. But I’m not going to pay attention to those, because that’s not how I would invest.

Snow: John, setting aside the merits of the individual GPs who might be running individual funds, what strategies will be popular 2013? And which will be sadly unpopular?

Crocker: Being very brief, I think real assets, as Moose pointed out. I think there’s a lot of concern about inflation coming at some point in the next couple of years. So real assets energy, operationally focused groups where there’s real proof that they can get into difficult situations and create value operationally, so what I call hands-on. I think just another middle market buyout fund will be an area that people will avoid.

I agree with Moose, Latin America’s coming up. I think there is out there a general feeling among LPs that you drive your investment by the smart people, the people that you’re backing. But they are more open minded now to look at new and different types of strategies. Doesn’t mean they’re going to put money this time around. But I think they’re all listening.

Snow: This has been a fascinating conversation. We promised to end at 11:45 and I think we should. Obviously it’s a big topic. There are many questions that we, unfortunately, did not get to.

I’m sure that Moose and John would be open to your contacting them with your specific questions for them. Obviously, as you can tell from this conversation, they really know their stuff.  They really know their way around the fundraising market.

If you are a fan of the topic of fundraising and private equity, you will see that Privcap has a wealth of thought leadership about the topic of fundraising. It is sponsored by MVision. And it is very high quality. And we would encourage you to explore it further by simply clicking on the link that you see.

In the meantime, thank you very much to John Crocker and to Moose from MVision for your expertise and sharing it with us. And I hope that both of you and your clients in your firm experience the lion’s share of success in the fundraising market in 2013.