Investor commitment to private equity as an asset class has not wavered, Coller Capital's latest Global Private Equity Barometer finds. The vast majority of LPs (97 per cent) will maintain or increase their allocations to private equity.
A total of 40 per cent plan an increased allocation, a proportion unchanged since the boom years.
All that is despite the fact that two thirds of LPs will have little or no 'headroom' for new fund commitments by this time next year, according to the Barometer. North American LPs will be particularly stretched, with 28 per cent of them expecting to be over their allocations by December 2009.
Surprisingly, investors' return expectations for the medium term have not changed: 43 per cent of LPs still expect net annual returns starting from 16 per cent over the next three to five years.
Jeremy Coller, CIO of Coller Capital, said, 'With their portfolios suffering from both the denominator effect and the distributions drought, LPs have three options: to increase their allocations to private equity, to cut their commitments, or to seek liquidity through secondaries. In practice, even LPs without allocation or liquidity problems will seek to access the secondaries market, because many will want to re-shape their portfolios to reflect new economic realities.'
The Barometer also shows that the current economic downturn will not slow the globalisation of private equity.
The proportion of North American LPs with six per cent or more of their private equity exposure in the Asia-Pacific will grow to almost 70 per cent within three years, from currently 41 per cent. Around one third of European LPs have an Asia-Pacific exposure of 6 per cent or more today, and this will rise to about two thirds of European LPs within three years.
According to the survey, India and China will continue to be the most attractive markets in the Asia-Pacific, followed by the developed economies of Japan and Australia. However, investors are concerned that the availability of capital is making it too easy for weak GPs to raise funds in the region.
Despite perceived barriers to investment in the Middle East, 20-30 per cent of LPs plan to make commitments to Middle East private equity over the next three years.
Source: Alt Assets