In contrast to past years where investors would be making numerous new investments throughout the year to maintain their allocation to private equity, in the first half of 2009 only 41
In contrast to past years where investors would be making numerous new investments throughout the year to maintain their allocation to private equity, in the first half of 2009 only 41 per cent have made any new investments at all, according to a survey by Preqin.
The survey of 100 investors also found that two thirds are still either at or exceeding their targeted level of exposure to private equity.
Despite the slow pace of commitments made by investors so far in 2009, only nine per cent of investors intend to decrease their allocations to private equity in the next 12 months.
Investors are still showing an appetite for private equity over the longer term, and 30 per cent intend to increase their target allocations to the asset class in the next three to five years.
In addition, 54 per cent of investors expect to make new commitments to private equity funds in the second half of 2009, and a further 25 per cent will recommence investment in the asset class in 2010.
The recent financial turmoil has had a considerable impact on the way investors view their portfolios, with 26 per cent of respondents saying investments have fallen short of their expectations, compared to 22 per cent in December 2008 and just two per cent in December 2007. However, 67 per cent of investors still state that private equity has met their expectations, and many reasoned that the long-term nature of the asset class meant that, although their portfolios were not performing as well as they hoped at present, they recognise the consistently high returns private equity has provided over the long term.
‘Although investor appetite for private equity has taken a slight knock following the market downturn, most investors recognise the long-term nature of the asset class and intend to remain in it for the foreseeable future,’ the report says. ‘For fund managers seeking fresh commitments in the year ahead however, the evidence is clear: investors will be returning to the market but will be more cautious and invest at a slower rate than they have in the past. At the same time, more than 1,600 funds are on the road seeking capital, close to record-breaking levels. The challenge, therefore, for fund managers seeking to raise capital in the coming year will be to stand out from all their competitors and to effectively promote their vehicles to the most appropriate audience.’
