PUBLICATION: Rede Liquidity Index 1H 2023 Report
We are pleased to announce the publication of the 11th edition of the Rede Liquidity Index (RLI), looking at institutional investor sentiment toward private equity fundraising in 2023. The RLI, a twice-yearly measure of LP liquidity, reflects expectations for overall fundraising momentum and identifies changes in LP appetite for specific segments of the market.
Key findings from the report:
After a year of free-fall, LP liquidity flattens out
After reaching a peak in the second half of 2021, the RLI declined sharply, bottoming out at 41 in 2H 2022. For 1H 2023, the RLI climbed by 9 points to 50, arresting this downward trajectory and indicating a flattening in LP liquidity. Poor fundraising momentum will likely continue to persist for some time to come, largely spurred by low distribution expectations and flat valuations.
While North American GPs are in demand, North American LPs are feeling the squeeze more than others
North American GPs are in demand with investors in all geographies expressing strong appetite to deploy capital into North American-focused funds. However, while European and Asian LPs report strong liquidity with local RLIs of 57 and 55 respectively, North American LPs are expecting a continued decrease in deployment, with a very low RLI score of 42.
LPs opt for smaller sized buyouts, secondaries, credit and distressed strategies amid macro volatility
Smaller sized buyout strategies continue to be favoured by investors, while a combination of offensive and defensive benefits mean that secondaries, income-oriented credit and distressed/turnaround funds are rising up LPs’ agendas.
LPs continue to signal strong appetite for Healthcare and Impact funds
Investor appetite for Healthcare is rising, with 37% planning to increase allocations to the investment theme, while Impact and Sustainability cements its position as the second most in-demand area for LPs.
Investor interest in secondaries strategies shifts
LP demand for classical secondary transactions has risen at the expense of GP-led transactions. A spike in enthusiasm for purchasing secondary stakes in PE funds can be viewed as a signal that LPs believe that we have 'reached the bottom' and are expecting valuations and performance to pick up in the medium term.
