Fund Strategy Proliferation: The ever-growing market for Private Equity platforms

Private CapitalFinancial ServicesFinance
Article Icon Article
Nadine Mensdorf
February 02, 2022
2 min read
Private CapitalFinancial ServicesFinance
Executive Summary
​A thought leadership piece for Private Capital on Fund Strategy Proliferation​ in the DACH region.
rra-image-chart-314.jpeg

 

01. Expansion into other geographies

There is a growing trend of funds expanding into other geographies to invest their ever-increasing new funds outside of the DACH region. Expanding beyond the DACH region can be observed more than ever at the mid-market fund level, where funds may be considering expanding into Southern Europe (e.g. Italy) or Benelux. Moreover, there are examples of multiple foreign funds looking to expand into the DACH region as they detect attractive investment opportunities. In these cases, funds have opened offices in cities where they discovered the best talent for DACH leadership. In particular Munich, Frankfurt and in some cases also Berlin or Zurich had strong talent pools. In addition, there are also funds that are re-establishing their DACH presence. In a few cases we have even seen funds expanding from the U.S. to the DACH region, in particular industrial-focused funds.

02. Expansion into other size segments

A second trend delineates funds that are raising vehicles in other size segments. For example, large-cap funds that are raising mid-cap verticals or conversely, mid-cap funds that are raising large-cap verticals. There is an additional trend of smaller mid-cap funds raising even smaller, micro-cap, verticals. The funds are doing this because they see interesting investment opportunities outside their own investment sweet-spot.

03. Expansion into other industries

A third trend can be identified as a shift towards sector-focused verticals. Established and well-known funds are expanding beyond their generalist strategy by raising unique sector-focused funds. They are in particular focusing on investments in high-growth environments, making Tech and Healthcare funds particularly pertinent. To accomplish this, funds are hiring experienced talent from Tech and  Healthcare sectors, outside of their own organization, to enable the success of fundraising and the new set-ups. As experienced talent with sector-specific know-how is rare on the investment side, funds are also considering talent with sector know-how from Investment Banking, Strategy Consulting or Corporate M&A for these roles.

04. Expansion into different strategies

A fourth trend is that established funds are working on the expansion into different strategies. These can be separate funds for minority investments, Public Equity funds or even Infrastructure, Credit, Real Estate or ESG funds as recent developments have shown.