preqin private equity investor survey q1 2011x

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  • 8/6/2019 Preqin Private Equity Investor Survey Q1 2011x

    1/13

    Preqin Investor Outlook: Private Equity

    The Opinions o 100 Leading Private Equity LPs

    on the Market and Their Plans in 2011

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    2 2010 Preqin Ltd. www.preqin.com

    Preqin Investor Outlook: Private Equity

    Preqin, the alternative assets industrys leading source o data and intelligence, welcomes you to the 2011edition o Preqin Investor Outlook: Private Equity, a unique look at investors in private equity, their currentopinions o the market and the outlook or undraising in the year ahead.

    Preqin Investor Outlook draws on the results o detailed interviews conducted with over 100 institutionalinvestors rom around the world during December 2010. The sample o LPs was selected rom Preqins InvestorIntelligence database, the most comprehensive and accurate source o inormation on investors in privateequity unds available today, and the interviews were carried out by our skilled teams o multi-lingual analysts.

    Speaking directly to institutions located across the globe has enabled us not only to provide in-depth analysiso their current views and opinions, but to accompany this with comments rom key investment proessionalsin their own words, providing readers with a unique insight into the attitudes o the leading investors in privateequity.

    We hope that you fnd the inormation included within this report useul and interesting and, as always, wewelcome any eedback and suggestions you may have or uture editions.

    Methodology:

    Contents:

    Fundraising in 2010 p.3

    LPs Returns Expectations p.4

    Re-Ups and New Relationships p.5

    What Can GPs Do To Stand Out? p.6

    Key Geographies and Stratgies in 2011 p.7

    Direct, Co-Investments and Secondaries p.8

    Challenges Facing LPs in 2011 p.9

    Allocations and Commitments: 2011 and Beyond p.10

    Preqin: A Direct Approach to Investor Intelligence p.11

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    Fundraisingto the next level

    We have a successful track record in raising

    capital for private equity and real estate

    Our ability to differentiate our clients in a highly

    North America

    +1.972.980.5800

    Europe

    +41.22.365.4500

    Asia

    +86.21.6124.2668

    Securities placed through CSP Securities, LPMember FINRA/SIPC

  • 8/6/2019 Preqin Private Equity Investor Survey Q1 2011x

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    4 2010 Preqin Ltd. www.preqin.com

    Preqin Investor Outlook: Private Equity

    Fundraising has remained extremely difficult in 2010: funds thatclosed in the first three quarters of the year raised $191.7bn,less than the $233.1bn raised in the same period the yearbefore.

    To gain an indication of what can be expected in terms offundraising in 2011, Preqin surveyed a global sample of 100

    institutional investors in private equity in December 2010 inorder to assess their current attitudes to the market and theirplans for future investments in the asset class.

    Low Levels of Activity in 2010

    Last years survey, conducted in December 2009, found that40% of LPs had opted not to make any new commitments toprivate equity funds over the course of that year. Little changedin 2010. 42% of respondents to our December 2010 survey toldus they had not made a single commitment to a fund during2010.

    Fig. 1 shows, for those that committed to funds in 2010, how

    the amount of capital used for these commitments comparedto the amount committed the year before. Although a significant22% of respondents informed us the amount of capital theycommitted to funds in 2010 was less than the amount theycommitted across funds in 2009, almost a third (31%) committedslightly more capital in 2010 compared to 2009 and a notable14% committed significantly more capital.

    The vast majority of investors are currently at or above theirtarget allocations to private equity. As Fig. 2 shows, 13% ofinvestors are exceeding their target allocations. The proportionof LPs that have yet to reach their target allocations has fallenby 12 percentage points from 45% in December 2009 to 33% inDecember 2010 and more LPs are finding themselves at theirtargeted level of exposure to the asset class.

    When the responses from LPs in different regions are compared,we can see that a considerable 18% of North American LPsare exceeding their target allocations, significantly more thanthe 10% of European respondents and 11% of Asia and Restof World respondents that are also over-allocated to privateequity. 40% of European investors are in fact below their target

    allocations.

    45%54%

    33%

    42%

    40%

    54%

    13%5%

    13%

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    90%

    100%

    Dec-09 Jun-10 Dec-10

    Above TargetAllocation

    At TargetAllocation

    Below TargetAllocation

    Source: Preqin

    Fig. 2: Proportion o Investors Currently At, Above or Below Their

    Target Allocations to Private Equity

    ProportionofRespondents

    Source: Preqin

    Fig. 1: Amount o Capital Investors Committed to Private Equity

    Funds in 2010 Compared to 2009

    The onset o the fnancial crisis saw private equity undraising become a much more challenging prospect or und

    managers. Many institutional investors which had previously been active in the asset class placed their investments on

    hold and GPs struggled to raise capital or new vehicles.

    Fundraising in 2010

    The vast majority of investors are currently at or

    above their target allocations to private equity...

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    Preqin Investor Outlook: Private Equity

    2010 Preqin Ltd. www.preqin.com 5

    Fig. 3 shows how investors levels of satisfaction with theirprivate equity investments have changed over the past fewyears. In December 2007, 24% of LPs felt their private equityinvestments had exceeded their expectations. In December2009, the proportion of LPs expressing this opinion had fallen

    to 7%. A slight improvement in LP satisfaction levels was seenin December 2010, when 10% of respondents felt their privateequity investments had exceeded their expectations.

    The proportion of investors that are dissatisfied with theperformance of their private equity investments roseconsiderably from 2% in December 2007 to 23% in December2009. However, in December 2010, the proportion of LPsexpressing this view dropped back to 13%.

    It is worth noting that investors return expectations for theirprivate equity investments have risen significantly over recentyears. As Fig. 4 shows, in December 2010, a considerable63% of respondents were expecting to receive returns of morethan four percentage points over public markets, a significantly

    higher proportion than was seen in 2007, when just 17% ofrespondents to the survey had similar expectations for thereturns from their private equity portfolios.

    Some of the respondents to our survey were keen to point

    out that investors need to rethink their return expectations.As a Swiss pension fund stated, LPs have to reassess thelandscape and think about what are realistic returns goingforward. Funds have achieved exceptionally high returns inrecent years but LPs need to be realistic now. They need tofind the best way to allocate and position themselves in the

    current market.

    Over the past couple o years, LPs have seen the valuations o many o their private equity und investments

    all signifcantly. Despite this, the vast majority eel their private equity investments have met or exceeded their

    expectations.

    5% 6% 3%

    32%

    13%

    11%12%

    46%

    39%

    37%23%

    17%

    42%52%

    63%

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    90%

    100%

    Dec-07 Dec-08 Dec-09 Dec-10

    Public Market+4.1% and Over

    Public Market +2.1to +4%

    Public Market +2%

    Same as PublicMarket

    Source: Preqin

    Fig. 4: Investors Return Expectations or Their Private Equity

    Portolios

    ProportionofRespondents

    24%

    7% 7%10%

    74%71% 70%

    78%

    2%

    22% 23%

    13%

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    90%

    Dec-07 Dec-08 Dec-09 Dec-10

    ExceededExpectations

    MetExpectations

    Fallen ShortofExpectations

    Source: Preqin

    Fig. 3: Proportion o Investors That Feel Their Private Equity Fund

    Investments Have Lived Up to Expectations

    ProportionofRespondents

    LPs Returns Expectations

    Some of the respondents to our survey were

    keen to point out that investors need to rethink

    their return expectations...

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    6 2010 Preqin Ltd. www.preqin.com

    Preqin Investor Outlook: Private Equity

    Encouragingly for GPs intending to fundraise in 2011, asignificant proportion of investors are still open to forging newfund manager relationships. 71% of respondents to the surveythat are seeking to make new commitments to private equity

    funds during 2011 will consider forging new relationships withGPs during this time.

    Many LPs are also keen to increase the number of relationshipsthey maintain with fund managers, as shown in Fig. 6. During2011-12, 44% of respondents that will make new commitmentsduring this timeframe anticipate increasing the number of

    GP relationships they possess and a further 44% expect tocontinue to invest with the same number of managers. Just 11%anticip

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