Demystifying the Challenges Facing Fundraising for Private Equity in the GCC Region

Abstract

Seeking fresh commitments from LPs at large is becoming a harder mandate to fulfill in the GCC region, and, with certain LPs, the process can be both lengthy and irritating. It requires a lot of patience and perseverance, as well as advance planning and compromise on the part of the GP, especially in light of the fact that some LPs have very elastic timelines and are not in hurry to make a decision, whereas the GP is under pressure to close. Therefore, be sure that you know your LPs well, and that you are able to accommodate their shifting sentiments and growing demands. Be innovative and come armed with a solid sales pitch, so you can execute a productive and effective fundraising campaign, which should include full disclosure of allocation of fees and expenses. LPs are becoming more sophisticated and demanding: Some have learned the hard way, by being burned by zombie funds. Many are less complacent, and are assertively focused on reducing the gap between LP and GPs; that is, they seek a better alignment of interest, governance, compliance, transparency, and disclosure. Consequently, GPs have to work diligently to find the optimal balance between their business model needs and their LPs’ demands, while upholding a high standard of fiduciary responsibility and honoring the limited partnership agreement, thus meeting their business economics requirements and protecting the integrity of the fledgling private equity industry in the GCC region.