Edelman Smithfield’s 2023 LP Survey on Private Equity Reveals Key Factors Driving LP Allocations

About 40% say high-quality leadership and firm reputation are more important than investment returns when deciding to commit capital

NEW YORK--(BUSINESS WIRE)--Edelman Smithfield, the global financial communications firm that specializes in the financial markets and strategic situations, today revealed the findings of its 2023 LP Survey on Private Equity (PE). The research gathers insights on limited partners’ (LPs) allocation and investment plans, LP perception of PE across a range of categories, and how effectively general partners (GPs) are communicating their strategy and capabilities in areas such as ESG.

“There is an overarching theme emerging from this research: while investors want to continue to commit to PE, there are some concerns around the asset class that, if left unaddressed, will affect GPs’ ability to fundraise and operate,” said Jess Gill, Director at Edelman Smithfield.

Tim Quinn, Executive Vice President at Edelman Smithfield, added, “Using the insights from this survey, PE firms have an opportunity to develop a communications approach that more fully meets LPs expectations, globally and by region. The results make a clear case that GPs should double-down on brand building, showcase the quality of their leadership team, highlight how their strategy fits the current economic environment, and demonstrate how their ESG practices are embedded throughout their firms.”

“LPs also continue to embrace social media platforms, such as LinkedIn, as important channels for learning about GPs and their executives. PE firms must continue to embrace social media as simply another means of shaping reputation among LPs and other key stakeholders,” said Quinn.

Approximately 500 LPs from across Europe, APAC, North America, and the Middle East were surveyed during the research.

Key highlights of the 2023 LP Survey on Private Equity include:

Reputation and high-quality leadership teams are important determinants in allocation decisions
About 40% of LPs say that a PE firm’s reputation and leadership team are more important than investment returns when making allocation decisions.

European and tech-focused strategies are most likely to attract LP capital in the near-term
85% of LPs say they were likely to allocate capital to Europe in the next 12-18 months, while tech stood out as the sector to which LPs most wanted to allocate.

LP expectations around ESG are growing
30% of LPs say that ESG is more important than investment returns when it comes to deciding on a PE firm to commit capital. 60% say it is important to see ESG-linked financial incentives for investment teams when deciding on an allocation.

Social media is frequently relied on as a source for information when deciding to allocate capital
94% of LPs say social media profiles of key PE firm personnel are important when deciding to invest in a fund, while 92% say GPs’ corporate social media pages are important.

Many GPs are seen to be failing at communicating plans for an economic downturn
1 in 5 LPs say the GPs they have invested in have not effectively communicated they have the right investment strategy to generate returns in a downturn.

Concerns about adhering to fiduciary duty
Nearly 1 in 5 LPs globally (18%) say PE firms are failing or doing poorly at exercising fiduciary duty.

About Edelman Smithfield

Edelman Smithfield is a financial communications boutique that specializes in the financial markets and strategic situations with the full reach and resources of Edelman. The Edelman Smithfield team comprises approximately 250 advisors across more than 25 cities and 15 countries serving an expansive roster of top organizations around the world. www.EdelmanSmithfield.com.