Private equity has gone from a niche asset class two decades ago to one that is much more likely to be found in individual and institutional portfolios today, according to a new report – The Future of Private Equity – SEI’s Investment Manager Services division.
The report examines the important choices managers and investors need to make regarding investment focus, data handling and outsourcing partnerships – all of which could ultimately mean the difference between success and failure as the industry continues to grow.
In an effort to provide stakeholders with a comprehensive understanding of where private equity is heading, SEI surveyed more than 200 industry general partners (GPs), limited partners (LPs) and consultants.
According to the report, 64 per cent of LPs plan to increase their allocation to private equity, marking a solid gain from only 26 per cent five years ago, while more than eight out of 10 GPs say compliance costs are climbing faster than other operating expenses, and 65 per cent of LPs are increasing the level of operational due diligence performed on GPs.
Some 71 per cent of respondents meanwhile, state that the most obvious change occurring in recent years has been the rising demand for transparency, providing more visibility into risk, operations, performance and valuation than ever before.
“The private equity market is in a period of rapid growth and diversification. The demand from investors has afforded managers significant opportunities,” says Philip Masterson (pictured), senior vice president of SEI’s investment manager services division and head of its international business. “In order to take advantage of these growing opportunities, however, GPs must address the unprecedented challenges facing them from a wide gamut of parties. Chief among them are the complex web of regulatory requirements coupled with increasingly demanding investor expectations that has put a strain on both the operational infrastructure and talent retention.”
Since 1995, private equity assets have risen dramatically, growing from USD30 billion to approximately USD4 trillion 20 years later.
While this rate of growth will likely taper off, many survey participants are convinced that strong demand will continue to drive asset growth at a healthy clip over the coming decade.
