PUBLICATION: Rede Liquidity Index 2H 2023 Report
We are pleased to announce the publication of the 12th edition of the Rede Liquidity Index (RLI), looking at institutional investor sentiment toward private equity fundraising in 2023 and expectations for 2024. 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:
Recovery plateaus as LP sentiment remains flat
The RLI score for 2H 2023 fell by a single point to 49, indicating LPs on average expect to allocate very slightly less capital to PE funds. This indicates LP sentiment remains muted, but that the sharp drop in LP liquidity seen over recent quarters appears to have plateaued.
LPs look for liquidity as pessimism prevails over exits
Sentiment towards distribution flows has risen 13 points but LPs remain pessimistic with an RLI score for distributions of 31. 61% of LPs report the slow pace of distributions to be the key concern as they plan 2024 agendas, with knock-on effects for their own liquidity – 42% are concerned about securing capital for their own investment programmes.
Re-ups tougher to secure but investors are increasingly open to new relationships
The RLI for new money commitments has increased by 6 points to 52, but the score for existing GP relationships dropped to 45, indicating that LPs’ commitments to new relationships will come at the expense of their existing GPs. LPs on average expect to earmark 59% of their 2024 allocation to re-ups, down from 70% this time last year.
Market conditions boost the appeal of private credit and Smaller Buyouts; North American-focused GPs remain most in demand
Despite a challenging overall picture for fundraising, there remain pockets of the market for which LPs continue to show robust demand. 50% of LPs plan to increase exposure to lower midmarket buyouts over the next year, with additional strong appetite to expand commitments to midmarket buyouts (46%), healthcare (35%), private credit (31%) and Sustainability / Impact (28%). North American focused GPs are in demand scoring 57 points, with investors in all geographies expressing strong appetite to deploy capital into North American-focused funds.