Private equity continues to gain steam among institutional investors, and is claiming a growing share of the alternative asset portfolios of these institutions. Coller Capital‘s Global Private Equity Barometer Winter 2014-2015 surveys 114 institutional private equity investors to assess their views and plans regarding:
- Returns from, and appetite for, PE
- Hedge fund commitments
- Investments in real assets
- The impact of new regulation on financial markets
- Direct investments
- DC pension schemes as a source of funding
- Gender diversity and PE returns
- Venture capital
- The debt markets
- The European economy
- The exit environment
Strong upward bias for private equity in 2015
The Coller report highlights that 39% of institutional investors surveyed planned to increase their PE investments in 2015, with only 7% indicating they planned to decrease their PE investments.
Yost Partners was up 0.8% for the first quarter, while the Yost Focused Long Funds lost 5% net. The firm's benchmark, the MSCI World Index, declined by 5.2%. The funds' returns outperformed their benchmark due to their tilt toward value, high exposures to energy and financials and a bias toward quality. In his first-quarter letter Read More
However, nearly two thirds of limited partner institutional investors expects other large investors to reconsider their hedge fund portfolio commitments given CalPERS’ decision to stop investing in the asset class.
Asia (ex-japan) is a popular PE target
Of note, almost 20% of limited partners plan to begin investing, or to increase investment, in China, Hong Kong, Taiwan and South East Asia. Latin America is also popular, with 14% planning to start or increase investments in that region. Of interest, 8% investors are planning to decrease investment in India.
Energy and real estate hot sectors for PE
The huge downturn in the energy sector over the last couple of months is apparently creating opportunities to deploy private equity. Nearly 80% of institutional investors plan to invest in energy-related private equity. Real estate is the second most popular sector, where 58% of limited partners are planning to invest in 2015. Other types of ‘real asset’ private equity are also growing in popularity. Between 25% and 35% of investors have current or plan private equity exposure to mining, shipping, timber and farmland next year.
PE investors anticipate 11%+ returns in 2015
A solid 93% of institutional investors project “annual net returns of 11%+ from across their PE portfolio over the next 3-5 years.” Of note, just 81% of investors had the same expectations two years ago. The Coller report highlights: “Improved return expectations are driven especially by European and North American buyouts – though improved returns are expected across all types of private equity except Asia-Pacific buyouts.”
Gender diversity has become a hot-button topic in the predominantly male private equity sector. More than 88% of private equity investors believe that more women in senior positions would have minimal direct impact on private equity investment returns. In fact, those who did think it would make a difference (12%) thought the impact of more women in senior PE management positions would be positive.