Private equity (PE) firms are finding it difficult to raise money as their limited partners (LPs), such as endowment funds, pension funds and development finance institutions, lay down tougher terms for investment. Fund managers, also called general partners, or GPs, say the LPs are demanding a greater share of profits and a seat on the investment committee. To assess the profitability of their investments, LPs are also looking into areas such as the team composition of PE firms. The change has been driven by a proliferation of PE firms that have little to differentiate them, and a growing perception among LPs that the market is overvalued. “The burden of proof is on GPs to explain to investors how their PE fund will be different from others,” said Harsha Raghavan, who founded Steer Capital Advisors Llp with Neeraj Bhargava and is raising funds. “Notwithstanding the growth, GPs need to segment the market and consequently help LPs identify the current set of market opportunities.” India-focused PE funds raised $1.3 billion ('5,811 crore) in the first half of 2010, or less than half the $2.7 billion raised in the first half of 2009, according to an August report by Emerging Market Private Equity Association, a non-profit independent global organization. […]

Private equity (PE) firms invested about $2,047 million across 88 deals during the quarter ended September 2010, according to a study by Venture Intelligence, a Chennai-based research firm focused on private equity and M&A transaction activity in India. This takes the total PE investments in 2010 to $6,566 million across 231 deals, more than twice the $2,502 million invested (179 deals) during the same period in 2009. These numbers do not include PE investments in real estate. The amount invested during the third quarter of 2010 was little over twice that during the same period last year, when around $976 million was invested across 65 deals, but lower than the $2,364 million across 71 deals in the immediate previous quarter. “For the first time since the first quarter of 2009, the amount invested by PE firms has dipped when compared to the immediate previous quarter,” said Arun Natarajan, managing director and chief executive officer of Venture Intelligence. […]

Asia's private equity (PE) industry is sitting on a cash pile, estimated at $50 billion, but a shortage of experienced fund managers is a big worry for the sector. A snap poll of about 250 PE experts at Super Return Asia 2010 conference showed that about 44 percent considered too much cash as the biggest risk to the industry, followed by absence of experienced fund managers. Asia is set to deliver strong returns for PE funds, with more than half the respondents expecting China to deliver the highest returns over the next three years. About half of the $50 billion investable capital available in Asia targeted for China. “The number of funds have proliferated dramatically in the last 5 to 10 years,” Nicholas Bloy, managing partner of Navis Capital told Reuters. […]

Private equity (PE) firms are returning to real estate investments through projects rather than equity as an easier exit option coupled with the relatively higher returns from the sector helped them overcome their qualms. Since late 2008, PE investors have been shying away from real estate investments as a stock market downturn took a larger toll on real estate prices, which were then priced higher than the broader market, resulting in many funds burning their fingers. “At the enterprise level, private equity in operating companies is a challenge. The exit is through public markets, and the public market is tired of real estate stories. So PE at corporate levels has gone for an expiry now,” V Hari Krishna, director at Kotak Realty Fund told Reuters. “At project levels, exit is easy. Even in the residential sector, the exit is easy once the apartment is sold,” he said. […]

Domestic private equity (PE) firms are turning to the equity market after about a decade, hoping to raise money from the public as funds go scarce both in India and abroad. Milestone Capital Advisors Ltd, which manages around `3,152 crore of assets in its portfolio, and Future Ventures India Ltd, the investment arm of retailer Kishore Biyani’s Future Group, have filed draft prospectuses with the Securities and Exchange Board of India, or Sebi, for a public listing of shares. Milestone says in its draft red herring prospectus (DRHP) that it will primarily use the money raised from its initial public offering (IPO) as seed capital for a new infrastructure fund (expected to be around `800 crore) and for a small and medium enterprises fund (`250-300 crore). Future Ventures expects to raise `750 crore from its IPO to “create, build, invest in or acquire, and operate businesses in consumption-led sectors,” it says in its DRHP, filed late August. […]