Investors have been predicting this for a long time: Emerging managers are in trouble.
It’s already hard enough as it is to convince a limited partner to take a chance on you. While you may have a compelling pitch—or even a list of promising companies you backed the last fund you worked at, you’re still going to market with something pretty new—and without a strong track record.
Now, try doing that in this market—when pensions and endowments haven’t been getting any distributions and are entirely oversaturated in their exposure to the private markets. The money that they do have to spend on venture is likely not going to you. It’s headed in the direction of the decades-old, strong-performing firms that are already competitive to get into.
That’s what investors are saying, anyway. But just how bad is it out there, really? Well…If you look at the data, quite terrible, honestly. If this year continues the way it’s been going, it will be the worst year for emerging manager fundraising in more than a decade. As of mid-April of this year, emerging managers had only raised $2.3 billion in assets for 56 funds, according to PitchBook. Managers will have to step it up by the end of this year, and raise some 5x of that figure just to surpass fundraising metrics from 2013 or 2014.
Here’s a look at fundraising:
It’s no secret that this is a challenging market, so perhaps it shouldn’t surprise you that fewer fund managers are even trying to go to market with emerging funds in the first place. Here’s how many funds had been raised by mid-April:
And for those who are boldly going out and asking for checks—they’re not getting as many commitments. Here’s how fund size has changed for emerging managers since the Dot Com bust:
All that being said—if you were thinking about going it alone this year: Best of luck to you.
WeWork’s not workin’...Earlier this week, WeWork published a “going concern” warning alongside its earnings, warning investors that its losses have the company looking into “strategic alternatives”—including bankruptcy, as my colleague Will Daniel writes. WeWork shares are in penny territory on the news, giving the company a $270 million market cap—a mere shadow of the $47 billion valuation WeWork once held in 2019 before its botched IPO attempt. Read the story here.
Asia buyouts…While some investors may be pulling back from investments in Asia, private equity firm CVC Capital Partners is trying to up its game. In an SEC filing yesterday, CVC said it had raised $4.5 billion for its sixth fund focused on Asia. The buyout firm is still fundraising and this is not a final close, someone familiar with the matter said. A CVC spokesman declined to comment.
See you tomorrow,
Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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