We will be neither the first nor, we suspect, the last industry participant to observe the challenges that financial sponsors, and private equity investors in particular, experienced in 2011. As we move into 2012, we do, however, find our glasses leaning more toward the full rather than empty side.

Limited Partners. The challenging fundraising environment has continued into 2011. Institutional investors, particularly public pension funds, are paring back the number of relationships, which bodes well for large established sponsors who are viewed as more stable and with deeper pockets to help buffer market volatility, In some cases, fund target sizes have been adjusted downwards, with economic and transparency concessions having become the new norm thanks in large part to ILPA. While concessions have varied among sponsors, what has become clear is that institutional investors remain committed to private equity and those capable of writing large checks are getting customized one-off arrangements with better economic terms. Whether through managed accounts, side-cars, direct investments, multi-strategy mandates or co-investments, institutional investors have taken advantage of the current fundraising cycle to actively partner with established sponsors in more creative ways, with the expectation of better returns in the long term.

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