How Reducing Managers Can Reduce Returns

LPs say they want to reduce the number of GP relationships, but a flood of capital is making it harder. Eaton Partners’ Jeff Eaton explains.

Last year’s strong exit markets means LPs are flush with capital to redeploy, but that doesn’t mean it’s easy. LPs have repeatedly said they want to reduce the number of GP relationships they manage, but the competition for the best funds means some LPs will get shut out, Eaton Partners’ Jeff Eaton told Privcap in a recent interview.

“There’s a little bit of a dilemma LPs have about not wanting to increase the number of managers they have,” Eaton says. If an LP can’t get into a fund it wants, does it abandon that sector or take on another manager? Often, Eaton says, “They are forced to start looking for new managers that might be focused on similar industries as some of these more well-known groups.”

You can view a clip here:

https://privcap.wistia.com/medias/8wj68ie1sb

In the rest of the interview, Eaton discusses the strong fundraising environment and the impact of high valuations. You can watch it or download the transcript here.