The majority of Limited Partners are positive on the outlook for private equity in North America and Europe in 2023 and 2024, believing these will be strong vintage years, according to Coller Capital’s latest Global Private Equity Barometer.
The majority of Limited Partners are positive on the outlook for private equity in North America and Europe in 2023 and 2024, believing these will be strong vintage years, according to Coller Capital’s latest Global Private Equity Barometer.
Investors’ views are more balanced on the outlook for private equity in Asia-Pacific.
Within private equity, most investors believe that the healthcare and pharmaceutical sectors will provide attractive investment opportunities over the next two years, and three quarters of LPs say the same about IT and business services. There’s a marked difference in views on energy, with more LPs stating a preference for renewables rather than hydrocarbons.
Within investment strategies, the majority of investors see good opportunities in mid-market and special situation funds in the next two years. Three quarters of LPs also see good opportunities in secondaries where they see an uptick in LPs using the secondaries market to rebalance portfolios. Fewer LPs see opportunities for GPs in large and mega buyouts, a marked change from their views five years ago. LPs also have concerns over the level of debt in buyout deals, with half saying the current proportion is too high.
The level of diligence that investors undertake has increased over the past two years, with more European LPs increasing their levels of diligence than their peers in North America and Asia-Pacific. Due diligence for fund commitments is a key reason for LPs returning to levels of travel not seen since pre-Covid days. Investors are also likely to travel to attend conferences and AGMs, with fewer LPs planning to return to their historical office commute. When it comes to the fund investment process, three fifths of investors are finding negotiating terms a challenge, but less so assessing managers or accessing funds. Their views are split on the importance of incentives when committing to a first close.
Investors are keeping an open mind on the usefulness of Artificial Intelligence (AI) to the private equity transaction process, with three quarters of LPs thinking it could be a useful tool for originating dealflow. Three fifths of LPs believe it could be useful as part of deal assessment or post transaction portfolio company engagement.
