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Comment: Private equity funds must prepare for greater scrutiny if industry is to survive

According to a global survey published by Coller Capital, the world’s biggest investor in second-hand private equity interests, institutional investors are predicting that one in five private equity groups will disappear this decade. With large investors, including pension funds, fund of funds and insurers, becoming increasingly selective, Richard Moulton (pictured), head of private equity at international law firm Eversheds, comments on the future prospects for private equity investment…

“As is well documented, there are still substantial amounts of capital available to private equity funds as a result of the vast amounts raised before the financial crisis. The world has changed since those heady days and pension funds and other institutions investing in private equity have become far more discerning in where they allocate capital between funds and the type of funds.

"Track records are key, as is the quality of the private equity managers themselves. Investors will take comfort that a fund with an overall sound investing record, with the inevitable mix of returns across the portfolio, is one in which the managers make the right judgement calls, have rigorous evaluation criteria and look to actively manage their investments through the good times and the bad. Funds looking to raise new money are experiencing a far greater degree of scrutiny from potential investors, which in the long run can only be a good thing for the industry as a whole.”

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