There has been a big leap in investor satisfaction with the transparency of GPs’ disclosures and communications, according to Coller Capital’s latest Global Private Equity Barometer. In the years following the Global Financial Crisis, only two in five LPs were satisfied with their GPs’ transparency. Four in five Limited Partners are satisfied today.
Many private equity investors believe rising geopolitical tensions will have a material effect on the asset allocation of private equity and venture capital funds in the next few years. And many also expect higher political risk in private equity’s emerging markets – especially Russia, China, the Middle East/North Africa, and Latin America. South East Asia and India are seen as less risky in political terms.
Most investors believe General Partners are not taking climate change seriously enough in their investment policies and practices. However, this is one of the few aspects of climate change on which LPs do agree – even within their own organisations. Only half of North American LPs can report an internal consensus on climate change, and this proportion falls to just two in five for Asia-Pacific LPs.
Investors’ starkly different attitudes to the climate change issue are particularly clear regionally. Over half of European investors say their own organisations will be carbon-neutral by 2030 – whereas two-thirds of LPs based in North America say they are unlikely to be carbon neutral at any time in the foreseeable future.
“Climate change remains a vexed and volatile topic in the investor community,” says Jeremy Coller, Chief Investment Officer of Coller Capital. “In much of the world there is limited agreement on what needs to be done even within LP organisations. That said, best practice is contagious in private equity – step back, and the direction of travel is clear.”
The private equity industry is likely to become more concentrated – with three-quarters of LPs expecting the largest General Partners to attract a higher proportion of total private equity commitments in the next five years. However, this growing concentration in AUM will not stop LPs from expanding the number of GPs to whom they are committed. On balance, more LPs expect to grow their roster of GP relationships than reduce it – with the trend especially marked among sovereign wealth funds and insurers.
Almost all private equity investors hold Advisory Committee (‘LPAC’) seats for at least some of their funds – and 23 per cent of LPs sit on the Advisory Committees of more than half the funds in which they invest. Although LPs are sceptical of the idea that LPACs represent all investors in a fund equally, they are nonetheless sanguine about the role played by LPACs generally. Three-quarters of LPs think Advisory Committees do a good job, and three-fifths think GPs generally allocate LPAC seats appropriately.
