Commitment issues

Establishing the true nature of LP investment intentions is a difficult task in the current market. Coller Capital's recent private equity Barometer suggested that a majority of LPs were concerned that as GPs find it more difficult to allocate money to sectors and geographies where they possess most experience, they will turn to areas where they have less experience. Alongside this so-called 'style-drift,' LPs are also concerned that fewer investment opportunities will mean cash outflows will significantly exceed inflows. It would be natural to assume that these two concerns might prompt a period of reflection by LPs or a re-shaping of the portfolio away from private equity. Not so, according to the survey. Nearly 40% of respondents plan to increase their allocation to private equity with only a tiny minority planning to decrease their allocation. These results suggest that while they are cautious about the future, LPs have decided that private equity is the asset class perhaps best-placed to withstand the economic downturn and continue to out-perform most other asset classes