GPs Struggle Amid Hunt for Liquidity, Barnes & Thornburg’s 2024 Investment Funds Outlook Report Shows

Second annual survey reinforces changing LP and GP dynamics, succession planning challenges, and opportunities in AI, cryptocurrency, and private credit

NEW YORK - Barnes & Thornburg announced today the release of the law firm's 2024 Investment Funds Outlook Report, which draws on insights from limited partners (LPs), general partners (GPs), and service providers across the private funds landscape.

The report looks into the changing relationship between LPs and GPs as the former gains leverage, while also delving into some of the hottest trends in today's market, including artificial intelligence (AI), cryptocurrency, private credit, and new regulatory challenges.

The report comes at a time when the private funds market is becoming increasingly difficult to anticipate and when costs on all sides of the deal table are rising.

"Both LPs and GPs acknowledge that the costs of launching and operating a private fund have steadily increased, with the costs associated with fundraising and compliance being a key component," says Scott L. Beal, partner and co-chair of Barnes & Thornburg's Private Funds and Asset Management practice.

Some of this year's key findings include:

• GPs continue to struggle as term, fundraising, and investment period extensions become more prevalent and expenses increase. Nearly 40 percent of both GPs (and LPs) observed increases in expenses over the past 12 months, which is more than twice the number reported last year. The majority of all respondents also saw high rates of fundraising period, investment period, and term extensions, as well as changes in GP commitments.

• Succession planning is even more important to LPs than a year ago, yet GPs show worsening progress. A whopping 96 percent of LPs say it is important that a fund have a succession plan in place (up from 66 percent last year), but only 38 percent of GPs currently have one.
• Seventy-seven percent of LPs want the funds in which they invest to use AI for investment analysis and decision-making, but only 26 percent of GPs have implemented AI functions. Adoption is vital, considering the vast majority of respondents expect generative and traditional AI to have a significant impact on fund performance over the next three years.

Barnes & Thornburg surveyed 138 LPs, sponsors, and service providers in April 2024 with the help of a third-party B2B panel provider, Dynata. To learn more, download the Barnes & Thornburg 2024 Investment Funds Outlook Report.

With more than 800 attorneys and other legal professionals, Barnes & Thornburg is one of the largest law firms in the country. The firm serves clients worldwide from offices in Atlanta, Boston, California, Chicago, Delaware, Indiana, Michigan, Minneapolis, Nashville, New Jersey, New York, Ohio, Philadelphia, Raleigh, Salt Lake City, South Florida, Texas and Washington, D.C. For more information, visit us online at www.btlaw.com.

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