UK LPs expect distributions to drop in 2017 – Rede survey

The survey, modelled on the Purchasing Managers' Index (PMI), is intended to be an indicator of expected liquidity for private equity investors in the next 12 months. The inaugural RLI measures LP sentiment by asking whether they expect more, less, or no change in a given category. The data is presented in the form of a diffusion index on a scale of 0-100, where a number below 50 represents a negative change, above 50 represents an expected increase, and 50 represents no change.

Rede said in a statement that 160 LPs participated in the survey, collectively managing assets worth more than €5tn, including around €1tn in private equity commitments.

British LPs had the most negative score of private equity sentiment in Rede's survey, scoring 30 out of 100 on the question of expected distributions from private equity. Benelux investors also had a negative outlook on distributions, with an index score of 44. In other European regions, the outlook was rosier, with French, DACH and Nordic LPs expecting an increase in distributions. French LPs were the most optimistic – though the sample size was fewer than 10.

According to Rede, the overall expected distributions for 2017 are consistent with last year, and that the expected decline in distributions by some LPs should also be seen in the context of 2016 being a record year for capital being returned to investors.

On a positive note, the index shows appetite for private equity exposure continues unabated, with LPs overall expecting to allocate more capital to the asset class in the next 12 months, illustrated by an RLI score of 67.

Funds-of-funds, insurance companies, family offices, asset and wealth managers, pension funds and consultants all expect to increase allocations to their existing primary fund PE relationships in the next 12 months. While endowments and foundations expect no change in allocation to their current managers, all LP types except asset managers and pension funds show positive sentiment in allocating capital to primary funds managed by GPs they do not currently have a relationship with.

Pension funds are the only LP group with a negative outlook, scoring 45 on expectations of allocations to new relationships through primary funds in the next 12 months.

Rede, which recently aided Nordic GP Summa Equity in its inaugural fundraise, expects to publish the index every six months. The full survey is available from Rede upon request.

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• Topics
• LPs
• Performance
• United Kingdom