About 44% of limited partners (LPs) believe private equity has become more attractive in the volatile post financial crisis world. Only 12% of investors think it has become less attractive, according to a study released by private equity secondaries specialist Coller Capital.
About 37% of LPs are planning to increase their allocation to private equity over the next 12 months, and half of sovereign wealth funds plan to grow their private equity teams, as do nearly half of insurers and asset managers, as well as a quarter of public pension plans.
LPs’ enthusiasm in the asset class is driven by its strong returns.
"In a low-return world, 86% of LPs are forecasting annual net returns of over 11% from their private equity portfolios, and a quarter are expecting net returns of 16% or more," says Jeremy Coller, CIO of Coller Capital.
Co-investing alongside general partners (GPs) has continued to grow in popularity. About 54% of LPs have co-invested with their GPs in the last two years.
LPs are also reducing their exposure to large buyouts and venture capital, and increasing exposure to growth capital and small-to-mid-market buyouts, in both North America and Europe.
LPs are also optimistic about the future. About 56% of LPs think the rate of distributions from private equity funds will increase over the next 12-18 months.