It isn’t easy to be a private investment manager trying to raise capital in 2023.
At the iConnections Global Alts conference on Tuesday, Blue Owl managing director John Dyment laid out some numbers to show just how hard it is: According to his figures, 12,471 managers are looking to raise about $3 trillion in the market right now.
Dyment put that $3 trillion goal into perspective by noting that private markets managers raised about $900 billion in 2021 and $700 billion in 2022. He added that whatever amount is raised in 2023, it’s still likely to be a far cry from the $3 trillion mark.
But Dyment, whose focus is on Blue Owl’s general partner stakes business, Dyal Capital, also believes that investors can still find that capital. But they may have to look outside the United States to do it.
“You’ve got a mismatch, so people are turning to other ways to fundraise,” he said.
He noted that some private managers have begun to tap into the wealth available in the Middle East to bring in more capital. With sovereign wealth giants such as the Abu Dhabi Investment Authority and Mubadala Investment Company, the region is home to a massive amount of funds.
Nevertheless, raising funds in the region comes with its own issues. “Everyone is focused on the Middle East, but it’s not easy to get there and get in front of a lot of investors,” Dyment said. His team advises managers to go to the region at least four times a year and to focus primarily on developing relationships, rather than simply “trying to sell them something the first time.”
When it comes to actually taking on investments, Dyment noted that these limited partners prefer to be strategic — they may want access to portfolio companies for their businesses, or to coinvest. Down the road, he added, these allocators may also want a stake in the manager’s business.
Latin America is also an untapped region for fundraising. “It hasn’t been on a lot of people’s radar screens because it’s been up and down over the years,” Dyment said. “If you look at areas like Mexico, Columbia, and Chile, all three have significant pension asset bases.”
He noted that Mexico, in particular, could be an attractive target. The pension reform legislation passed by the country in 2020 went into effect earlier this year. It requires an increase in employer contributions to plans, which means there could be more capital available for investors. Dyment predicts that the figure could be anywhere between $8 billion and $10 billion.
“Naturally, you’ll have a growing asset base,” he said, noting that regional placement agents could be useful in setting up connections between investors and allocators.
Regardless of where managers are fundraising, Dyment emphasized the importance of staying current. “Throw away the pitch book you used a year ago,” he said. “The market has changed. Get in front of investors, have a business plan, and spend your time wisely.”
