Family offices staying true to private equity

The fallout from the financial crisis on private equity has been manifold. The buoyant buyout market was stopped in its tracks as the important ingredient leverage became hard to come by; portfolio companies were in need of fresh capital in order to avert insolvency; politicians crying foul over the industry’s unchecked growth led to new regulation being penned; and LPs had to deal with the denominator effect as public stock markets tumbled, thus readjusting their allocations.

Fundraising for the asset class therefore suffered and macroeconomic demons continue to burden any GP doing the fundraising rounds. As most placement agents are quick to point out, the process has become more onerous with LPs running significantly more thorough due diligences and looking to secure more LP-friendly terms and conditions.

Additionally, the pool of LPs committing to private equity has shrunk post-crisis. In this respect, the findings of a survey of 50 European family offices commissioned by LPEQ, the group of European listed private equity companies, is heartening. More than half of the offices surveyed are considering increasing their exposure to private equity this year as they regard the asset class to be well-positioned to benefit from the recovery.

“We are satisfied with the performance of our private equity portfolio and remain committed to the asset class,” stated one family office representative, whose return expectations for private equity are 2-3x net of fees.

Family offices in general are more committed to the asset class, as the survey showed that their weighted mean allocation to private equity was 14.6%, compared to a typical private equity allocation of 4.3% for institutional investors in 2009, according to a study by Russell Investments.

What is more, as one family investor highlighted, top tier private equity funds have become more accessible. “Currently, it is not difficult to gain entry to top funds, especially in the US, as many foundations for example have reduced their allocations or exited the asset class entirely,” he notes, and adds that there has been an increasing amount of enquiries this year from across the pond.

In the wake of the crisis, therefore, family offices look set to take advantage of the gaps left by disparaged LPs.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• Fundraising
• LPs
• Nordics
• Southern Europe
• UK / Ireland
• DACH
• France
• Benelux