Listed Private Equity (LPE) funds have spent the last 18 months strengthening their balance sheets in response to volatile market conditions, whilst anticipating a wave of opportunity for the next few years. These are the findings of the first ever LPE ‘Cash Flow Compass’ report, jointly published by LPEQ and Deloitte.
The first of a quarterly report, the LPE Cash Flow Compass is designed to measure activity in the LPE industry, based on data provided by LPEQ members. The LPEQ members contributing to this quarterly managed a global investment portfolio valued at GB P6.8 billion as at 31 March 2011.
The major highlights are as follows:
Fund-of-funds have used large net cash inflows to strengthen their balance sheets over the 18 month period.
The ratio of total fund-of-funds portfolio value to undrawn commitments reached 3.9x in Q2 2011 compared with 2.3x in Q2 2010.
Over half of all new investment in direct funds over the six quarters was in the information technology and healthcare sectors.
The large increase in realisation activity within the buyout sector was driven by investments in buyout funds of all sizes. Activity levels in the venture and growth sector experienced smoother increases throughout the six quarters under review.
The reduction in buyout activity levels in the first half of 2011 may be seasonal, but could also reflect increasing uncertainty relating to the sovereign debt crisis. The deepening of the crisis since 30 June 2011 could impact the level of investment activity further.
