Private Markets Due Diligence:

BY THE NUMBERS

This year marked eVestment’s third annual Private Markets Due Diligence Survey and the largest to date, including investor, consultant and fund manager respondents representing private market assets under management or advisory of more than $850 billion. 

Respondents were surveyed on a range of key industry topics, including perspectives towards the use of credit facilities, benchmarking approaches and more. Explore some of the survey highlights in the infographic below.

PREDICTING FUTURE SUCCESS

Top Three Factors Perceived as Extremely Important in Due Diligence

Investors, consultants and fund managers agree that “team” is the most important factor when it comes to manager selection, but there is a disconnect when it comes to the importance of “strategy.” Investors and consultants regard strategy as the next most important factor in due diligence at 67% whereas only 54% of fund managers agreed. Instead, fund managers believed market opportunity held greater importance.

Investors & Consultants:

#1: Team

#2: Strategy

#3: Track Record

Fund Managers:

#1: Team

#2: Track Record

#3: Market Opportunity

CREDIT FACILITY SENTIMENT

With such proliferation of use, and coverage in the media, what do investors and consultants really think about managers using credit facilities to manage drawdowns? Surprisingly, 53% of investors and consultants hold a neutral view to the use of credit facilities. Only 23% of investors and consultants viewed the use of credit facilities as negative, and 23% as positive. Many respondents that held a neutral view stated they would want to assess the use on a case-by-case basis and reserve judgment until the finer details were better understood.

Positive 23%
Neutral View 53%
Negative 23%

INVESTORS’ INCREASING DATA REQUIREMENTS

78%

of fund managers believe that investors are demanding increasingly granular performance data compared to previous fundraises.

TRUST BUT VERIFY

This year, 36% of investors and consultants responded that they never or rarely trust the performance data provided by the fund manager. Some of the reasons respondents gave for this view included a distrust of unrealized valuations during fundraising and the experience of finding errors, albeit not often material. This probably explains why when surveyed on their frequency of recalculating fund managers’ track records, 75% of investors and consultants stated that they recalculate performance numbers more often than not.

GROSS VS. NET PERFORMANCE

65%

of investors and consultants cite Net to LP Performance as an extremely important area of focus during their track record analysis, with many comparing it to gross performance to assess fee impact.

IDENTIFYING ALPHA

Nearly two-thirds of investors and consultants use Public Market Equivalent Analysis, with more than 50% increasing their use of the analysis practice. Many respondents said that they will vary the use of index based on the geography and/or sector of the fund they were looking at, confirming that PME analysis is being used as a due diligence tool.

Read the full findings from the 2018 Private Markets Due Diligence Survey:

About eVestment Private Markets
eVestment Private Markets is a market intelligence and performance analytics solution delivered by eVestment, a Nasdaq company. eVestment Private Markets serves both LPs and GPs within due diligence and investor relations. Our sole focus is providing our clients with the information they need to make more informed decisions.

www.evestment.com/privatemarkets