Forty four per cent of investors expect to commit capital to private equity before the end of 2012, the latest Preqin Investor Outlook: Private Equity reveals.
Despite uncertainty in the wider financial markets, private equity investors remain positive, with 90 per cent expecting to maintain or increase their allocations to the asset class in the longer term.
Competition continues to increase among fund managers, with 1,878 funds on the road competing for capital in H2 2012. Encouragingly, eighty six per cent of investors interviewed by Preqin expect to consider at least some new manager relationships over the next 12 months, and just 12 per cent expect their total number of GP relationships to decrease in the future.
Nevertheless, investors generally remain cautious when making new commitments, and just 23 per cent expect to invest in first-time funds in the next 12 months.
The report also found that 33 per cent of LPs are currently below their targeted levels of exposure to private equity.
Ninety per cent of North America-based investors are currently at or below their target allocations to private equity, compared to 77 per cent of European LPs and 73 per cent of LPs based in Asia and rest of world.
Almost half (49 per cent) of LPs intend to commit to small to mid-market buyout funds in the next 12 months, with venture capital and growth following at 25 per cent and 22 per cent respectively.
Seventy two per cent of LPs will invest or consider investing in emerging markets, and 95 per cent of these expect to increase their exposure to these regions over the next 12 months.
Forty per cent of investors look to participate as co-investors in deals alongside their fund managers, and 28 per cent invest directly on a proprietary basis.
Ninety one per cent of investors already active in direct or co-investment expect to maintain or increase their activity in these areas in 2012 compared to 2011.
Sixty five per cent of LPs expect returns in excess of 400 basis points over public markets.
Just 19 per cent of investors expect to increase their exposure to private equity over the next 12 months, while 11 per cent expect their allocations to the asset class to go down.
“Aggregate capital raised by funds closing in H1 2012 has increased slightly in comparison to H2 2011, despite concerns about ongoing problems in the eurozone and wider financial markets,” says Antonia Lee, manager, private equity investor data, Preqin. “Although some investors remain reluctant to commit fresh capital to funds, and others are exploring new methods of accessing private equity investments, the majority of LPs intend to continue to allocate capital to private equity funds in the longer term.
“However, in such a competitive market, fund managers must assess their existing LP base to establish how much capital they are likely to receive from existing investors and how much capital they are likely to need to source from additional LPs.”
