PUBLICATION: Rede Liquidity Index 1H 2022 Report

We are pleased to announce the publication of the 9th edition of the Rede Liquidity Index (RLI), looking at institutional investor sentiment toward private equity fundraising in 2022. The RLI, a twice-yearly measure of LP liquidity, reflects expectations for overall fundraising momentum and identifies changes in LP appetite for specific segments of the market.

Gabrielle Joseph presents the results:

Key Findings:

1. LARGE DROP IN RLI SCORE
   The RLI dropped sharply from 70 to 55, representing a noticeable fall in LP sentiment since the end of 2021. While on average, LPs expect modest growth in their deployment to PE funds over the next 12 months, an unprecedented 17% plan to decrease their commitments.

2. SQUEEZE ON ‘NEW MONEY’ COMMITMENTS
   With LPs struggling to keep pace with reup demand from their existing relationships, RLI for deployment to new GP relationships falls to 45. A 36% of LPs plan to reduce their ‘new money’ commitments in coming months.

3. DISTRIBUTION EXPECTATIONS FALLING SIGNIFICANTLY
   After a record high of 73 in 2H 2021, the RLI for distributions has fallen to 33 - with 53% of LPs now expecting a decrease in the volume of distributions they make over the next 12 months.

4. PRIVATE CREDIT BUBBLING UP
   LPs are responding to macro concerns with increasing interest in downside-protected and opportunistic strategies. 20% of LPs plan to increase deployment to income-oriented credit, with a further 20% looking to expand in distressed / turnaround plays, a rise of 15 percentage points since the last edition of the RLI in 2H 2021.

5. SMALLER BUYOUTS STILL IN DEMAND
   Against a context of spiralling inflation, interest rate rises and volatility in the public markets, general demand for equity strategies has reduced. However, small buyouts has fared better than large buyouts, potentially seen as less reliant on capital markets to deliver returns. This also likely reflects the significant fundraising volumes we have seen in the large cap segment over the last 12 months, with LPs looking to rebalance their portfolios.

6. HEALTHCARE OUTSTRIPS TECH FOR THE FIRST TIME, WITH SUSTAINABILITY SNAPPING AT THEIR HEELS
   While demand for technology funds remains strong, it has been surpassed by healthcare for the first time as the most in demand strategy. Meanwhile, Sustainability / Impact continues to edge up LP’ agendas with 28% now planning to increase in this area.