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India Venture Capital and Private Equity Report 2014 Table 1.6: LP commitment details in sector specific and diversified funds LP Type (Sample size) Sector specific funds Diversified funds % of commitments % of commitments Panel A: Classification by LP origin Domestic (186) 37.63% 62.37% Foreign (368) 37.77% 62.23% Panel B: Classification by LP orientation Private sector (277) 41.15% 58.85% Public sector (202) 32.67% 67.33% Development focused (75) 38.67% 61.33% Panel C: Classification by LP type Asset managers / Fund of funds (183) 39.89% 60.11% Commercial banks & financial institutions (105) 37.14% 62.86% Corporations (51) 31.37% 68.63% Government agencies & development institutions (79) 37.97% 62.03% Insurance companies (35) 40% 60% Multi-lateral agencies and others (61) 57.38% 42.62% Pension funds (23) 4.35% 95.65% University endowments & foundations (17) 5.88% 94.12% 100% 80% 60% 40% 20% 38% 62% 55% 45% 79% 21% 37% 63% 58% 42% 0% Domestic Foreign Private Public Development Type of LP Sector Specific funds Diversified funds Fig 1.5: Percentage of amount committed by LPs in sector specific and diversified funds The overall trend seen in Table 1.6 is that across LPs (with the exception of MLA agency category) a majority of the commitments are in diversified funds. This indicates the propensity of the LPs to make commitments more frequently in diversified funds as compared to sector specific funds. However, if we analyse the amount of commitment, the trends are slightly different (see Figure 1.5). LP's in many categories (for example foreign LPs and private sector LPs) tend to commit more amounts to sector specific funds as compared to diversified funds. This indicated that some categories of LPs are prepared to make targeted commitments rather than going for divesification. While foreign LP's have committed more to sector specific funds as compared to diversified funds, in the case of domestic investors, it was the reverse. The same trend could also be seen between private sector LPs and public sector LPs. While private sector LPs have committed more amounts to sector specific funds, the public sector LPs have committed more to diversified funds. © Indian Institute of Technology Madras 10
India Venture Capital and Private Equity Report 2014 100% 93% 97% 95% 98% 98% 80% 60% 40% 20% 0% 7% 3% 5% 2% 2% Domestic Foreign Private Public Development Type of LP Multi-sector funds Sole technology funds Fig 1.6: Percentage of amount committed by LPs in multi-sector and sole technology funds When the commitments made by LPs were classified on the basis of the technology focus of the funds they have invested, the trend is more secular, both in terms of number of commitments as well as amount committed. There has been a strong preference to invest in non-technology funds as compared to technology funds across all categories of LPs. The average commitment per fund made in non-technology funds is also considerably higher. Figure 1.6 gives the distribution of the commitment amount between multi-sector funds and sole technology funds. More than 90 per cent of the amount committed across all categories of LPs has been in multi-sector funds. The results indicate that if technology specific funds need to be raised, then suitable policy incentives have to be provided to the LPs to encourage investing in funds that would predominantly invest in technology based companies. Table 1.7: LP commitments in technology and non-technology funds LP Type (Sample size) Technology funds Non technology funds Panel A: Classification by LP origin % of commitments % of commitments Domestic (186) 16.13% 83.87% Foreign (368) 10.6% 89.4% Panel B: Classification by LP orientation Private sector (277) 14.8% 85.2% Public sector (202) 6.93% 93.07% Development focused (75) 18.67% 81.33% Panel C: Classification by LP type Asset managers / Fund of funds (183) 13.12% 86.88% Commercial banks & financial institutions (105) 7.62% 92.38% Corporations (51) 11.77% 88.23% Government agencies & development institutions (79) 17.72% 82.3% Insurance companies (35) 5.71% 94.29% Multi-lateral agencies and others (61) 21.31% 78.69% Pension funds (23) 8.7% 91.3% University endowments & foundations (17) - 100% 1.7 Patterns in the LP-GP combination We also analysed our data to find out whether the LPs exhibit any preference towards particular type of GP or vice versa as indicated by the commitments made. Since the performance of the GPs in terms of fund returns © Indian Institute of Technology Madras 11
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