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Maximising Returns for Limited Partners: The Strategic Advantage of Direct Deals

Maximising Returns for Limited Partners: The Strategic Advantage of Direct Deals


In the evolving landscape of private equity, Limited Partners (LPs) are increasingly seeking direct investment opportunities to enhance returns, improve transparency, and exert greater control over their investments. Leveraging the expertise of experienced managers can provide LPs with strategic advantages in accessing these direct deals. This report explores how LPs can utilise managers to tap into direct investment opportunities, supported by current market statistics and trends.

The Role of Managers in Direct Deals

Managers play a crucial role in facilitating direct deals for LPs. Their deep market knowledge, extensive networks, and robust due diligence processes enable them to identify and secure high-quality investment opportunities that might otherwise be inaccessible. By partnering with skilled managers, LPs can benefit from:

  1. Expertise and Experience: Managers bring a wealth of experience in deal sourcing, structuring, and execution. Their expertise ensures that LPs are investing in vetted and potentially lucrative opportunities.

  2. Network Access: Established managers have extensive networks that provide access to a wide range of opportunities, including off-market deals that are not publicly advertised.

  3. Due Diligence and Risk Management: Managers conduct thorough due diligence, mitigating risks and ensuring that investments align with the LPs' strategic objectives.

  4. Operational Support: Post-investment, managers can offer operational support to portfolio companies, driving value creation and enhancing returns.

Current Market Trends and Statistics

As of May 2024, several key trends highlight the growing importance of direct deals and the role of managers:

  1. Increased Allocation to Direct Investments: According to a recent survey by Preqin, 45% of LPs have increased their allocations to direct investments over the past year. This trend reflects a broader shift towards more active investment strategies.

  2. Performance Premium: Data from Cambridge Associates indicates that direct investments have outperformed traditional fund investments by an average of 3-5% annually over the past decade. This performance premium is a significant driver for LPs seeking higher returns.

  3. Manager-Led Transactions: In 2023, manager-led transactions accounted for approximately 30% of all direct deals, demonstrating the pivotal role managers play in facilitating these investments (Source: PitchBook).

  4. Enhanced Transparency: A study by EY highlights that 60% of LPs cite improved transparency and reporting as a key benefit of direct investments facilitated by managers.

Trends in Direct Investment Allocation

Below are charts illustrating the trends in direct investment allocation and performance.

Chart 1: LP Allocation to Direct Investments Over Time ($Bn)

LP Allocation to Direct Investments Over Time

Chart 2: Performance Premium of Direct Investments Compared to Traditional Fund Investments (Multiple Over Invested Capital)

Performance Premium of Direct Investments Compared to Traditional Fund Investments

Case Study: Success through Strategic Partnerships

Consider the case of a leading pension fund that partnered with a seasoned private equity manager to access direct deals in the technology sector. Through this collaboration, the pension fund successfully invested in several high-growth tech companies, achieving a net internal rate of return (IRR) of 18% over three years. The manager's industry expertise and extensive network were instrumental in identifying and executing these lucrative investments.

Key Benefits for LPs

  1. Enhanced Returns: Direct deals often come with lower fees and higher potential returns. By bypassing intermediary layers, LPs can capture more value from their investments.

  2. Greater Control: Direct investments provide LPs with more control over investment decisions and the ability to tailor strategies to their specific goals.

  3. Transparency: With direct deals, LPs gain clearer insights into the performance and operations of their investments, enabling better-informed decisions.

  4. Customization: Managers can tailor investment opportunities to meet the unique needs and preferences of LPs, providing bespoke solutions that align with their strategic objectives.

Challenges and Considerations

While the benefits are substantial, LPs must also be aware of the challenges associated with direct deals:

  1. Resource Intensity: Direct investments require significant time and resources for due diligence and ongoing management. LPs must ensure they have the necessary capabilities or partner with managers who can provide these services.

  2. Risk Management: Direct deals can be riskier than fund investments due to the concentrated nature of the investments. Effective risk management strategies are essential to mitigate potential downsides.

  3. Market Dynamics: The competitive landscape for high-quality direct deals can be intense. Partnering with experienced managers with strong deal-sourcing capabilities is crucial to securing the best opportunities.


For LPs, accessing direct deals through experienced managers offers a compelling opportunity to enhance returns, mitigate risks, and achieve greater control over their investment portfolios. The expertise, network access, and operational support provided by managers are invaluable in navigating the complexities of direct investments. As market trends continue to favour direct deals, strategic partnerships with skilled managers will remain a critical component of successful investment strategies for LPs.

Author: Ethan Khatri, AIV Capital Research.


AIV Capital

AIV Capital is a leading investment firm specialising in creating value for Limited Partners through strategic and targeted investment approaches. With a focus on portfolio construction and direct investment opportunities, AIV Capital leverages its deep industry expertise and extensive network to provide bespoke investment solutions. Our team of seasoned professionals is dedicated to helping Limited Partners achieve their financial objectives by offering a comprehensive range of services, including due diligence, risk management, and operational support.

By prioritising transparency, collaboration, and innovation, AIV Capital ensures that our clients have access to high-quality investment opportunities and tailored strategies that enhance market exposure and liquidity.


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