A year ago, uncertainty hung in the air. Fueled by factors like geopolitical tensions, rising inflation, and interest rate hikes, participants in Dynamo’s first GP survey in 2023 signaled that while GPs remained cautiously optimistic, they were mindful that a potentially rocky road may lay ahead.

In 2024, GPs appeared to have a new take.

Participants in Dynamo’s 2nd GP Frontline Insights Survey seemed to have shed much of the uncertainty. One year ago, one in three GPs surveyed said economic uncertainty was making forthcoming fundraising activity too hard to project. This dropped by 11 points in the most recent survey.

Amid a seemingly renewed sense of confidence, here is what else GPs said this year about their investment strategies, business challenges, technology budgets, and strategic priorities.

View news article: GPs adopting a more optimistic outlook, says new survey

More Dry Powder – Where’s It Going?

It’s no secret that 2023 closed with investors sitting on record levels of dry powder. Therefore, the fact that 43% of the GP respondents anticipate deploying more capital in 2024 compared to 2023 was in line with expectations. The ample capital could leave investors looking for diversification and potentially higher returns poised for a potential deal-frenzy in alternatives. 40% of GPs indicated that their fundraising efforts would either stay the same or ramp up from 2023.

Where they plan to deploy capital deserves some attention, as GPs appear to making geographic adjustments to their strategy. While US/Canada remained the top destination, it saw a decrease from 81% to 67%. Europe doubled from 11% to 22%, and Asia increased from 4% to 8%. The Middle East, however, remained relatively low at 2%.

Crypto Rises, AI Falls

GPs surprised with their responses on AI integrations and cryptocurrency. Though GPs ranked “creating efficiencies and optimizing workflows” as the top priority when implementing a new technology – they ranked AI and machine learning integration last in technology priorities. Though the responses seem to reveal a contradiction, it may be a reflection of how GPs are thinking about AI overall. Asset managers may be largely considering AI for its impact on portfolio companies, and not necessarily for their own productivity.

In another interesting result, cryptocurrency re-emerged as an unconventional bet. Last year, zero respondents said they planned to increase crypto investments; this year, 7 percent said they would. Though it’s still a small overall percentage of GPs, it will be interesting to see if this year’s finding reflects a growing belief in the long-term potential of crypto and blockchain technology. Only time will tell.

Expected Increases in Management Fees

After dodging a recession and preparing for the potential for fund overperformance in 2024, GPs appear to be feeling more confident when it comes to raising their management fees. As compared to 2023 respondents, four times as many 2024 survey participants indicated they will increase their management fees over the next 12 months. Twenty percent said they expect to raise prices this year. Just 5 percent planned to do so last year, suggesting a rebalancing of power in the GP-LP dynamic.

And, the anticipated increase in fee income might play a factor in tech spending. Nearly all GPs plan to either increase or maintain their technology budgets, prioritizing efficiency and workflow optimization above all else. When it came to priorities for new technology implementations, “cost” remained in third place.

View news article: Survey: GPs plan to ramp up fees in show of confidence

View news article: Survey: More GPs likely to raise fees in 2024 as confidence improves

Embracing the Future: General Partners’ Outlook

Overall, GPs in 2024 are projecting more optimism and confidence. They continue their embrace of technology as a strategic enabler, though they appear to still be wading through the AI buzz to determine the most practical applications for their own productivity. With a deal-making market that looks promising, organized due diligence, efficient workflows, and optimized data management can help GP investors make the most of 2024’s opportunities.

Learn More About 2024 GP Attitudes, Predictions, and Strategic Plans

For more insights about how GPs plan to navigate the complex alternatives investing landscape, the full findings of Dynamo’s 2024 GP survey are available to download today.

Dynamo Frontline Insight Report: Trends, Challenges, & Insights from Leading General Partners (GPs)

 

Henry Wadsworth is the Vice President of Sales, Americas at Dynamo. Henry leverages over 10 years of experience in business development and global sales, most recently leading the General Partner business unit for Dynamo in Singapore. Prior to Dynamo, Henry managed the Business Development function at Preqin, where he was responsible for engaging with businesses worldwide to help them better understand and respond to investing and fund management trends. Connect with Henry on LinkedIn.