Institutional investors target higher private equity exposure

Institutional investors plan to put more money into private equity and hedge funds in 2005, according to the first Global Private Equity Barometer, published by Coller Capital. However, at least a quarter of investors (LPs) in venture capital and buyout funds across North America, Europe and Asia-Pacific expect improved terms and conditions from private equity fund managers (GPs) in return. The proportion of LPs expecting more favourable terms and conditions rises to 37% for European venture funds and 41% for generalist funds and funds-of-funds.The Barometer found that more than half of institutional investors in private equity (56%) expect to increase their exposure to alternative assets overall during the next year, with 43% expecting to increase their allocations to private equity and 45% planning to do the same with hedge funds. The good news for 2005 fundraisers is that more than half (53%) of LPs expect to increase the number of their GP relationships, with this figure rising to 62% among Asian LPs.Buoyant investor sentiment towards private equity is best quantified by looking at LPs' medium-term return expectations. The Barometer found that, overall, three quarters of private equity investors expect to achieve net portfolio returns of 11-20% over the next 3-5 years, with half of LPs expecting returns of 11-15% and a further quarter expecting returns in the 16-20% range. As for returns from different kinds of private equity funds, investors broadly expect returns in the 11-20% range from buyout funds in all three regions and from North American venture funds; for Asian and European venture funds expectations are lower.

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• Topics
• LPs
• UK / Ireland