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Coller Capital: Global Private Equity Barometer, Winter 2006-07
Wednesday 17 January 2007 Return expectations of Private Equity Investors reach record levels • LPs plan significant further growth in private equity allocations
• Investors worldwide converge on ‘recipe’ for private equity success
• Two early signs the private equity boom may be plateauing
The return expectations of private equity investors have strengthened significantly over the last 12 months – almost half of LPs are now forecasting medium-term returns of 16%+, according to Coller Capital’s latest Global Private Equity Barometer, compared with just one third of LPs in the Barometer for Winter 2005-06.
LP satisfaction has also reached unprecedented levels. An astonishing 97% of investors are pleased with their private equity returns over the last year – and the proportion of investors reporting themselves very pleased has more than tripled in the last two years, to 56%.
As a result, investors intend to continue pouring money into the asset class: 49% of LPs are planning increased allocations to private equity over the next 12 months, and 57% plan the same for alternative assets generally.
The Barometer also explored the factors LPs see as important to their own success as investors in private equity funds. Critical to an LP’s success are the following characteristics (in order of importance):
• The length of time an LP has been investing
• The stability and incentivisation of its investment team
• A proactive approach to building and managing GP relationships
• Critical mass in the investment programme – expressed either in investment team size or in number/aggregate value of fund commitments.
Overall, LPs see their location as relatively unimportant to their chances of achieving top-notch returns.
This edition of the Barometer contains two signs that the private equity boom may be approaching a plateau: • A significant proportion of LPs believe the exit environment for European and North American buyouts (two of the biggest drivers of returns in recent years) will deteriorate over the next year or two – 43% and 44% of LPs hold this view for the two markets respectively.
• Although on balance distributions are expected to remain strong, there is no longer a majority of LPs expecting distributions to improve – as there was in the Winter Barometer last year and the year before.
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Other topics covered in this edition of the Barometer include:
• The most favourable national environments for PE
• The most promising areas for GP investment over the next 12 months
• The prospects for IPOs as an exit route
• The post-flotation performance of private equity-backed IPOs
• The attractiveness of take-privates as investments
• The pace of GP investment over the next 12 months
• The willingness of LPs to decline re-investment in GP funds
Commenting on the findings, Jeremy Coller, chief executive of Coller Capital, said: “There are good LPs and bad LPs, just as there are good GPs and bad GPs – it’s just that there has been more focus on the latter. We should remember that approaching half of LPs have been investing for less than 10 years – the nominal life of a private equity fund. Over time, we will see the emergence of a far more competitive market for LP talent, and this can only be a good thing for the beneficiaries of pension funds and other not-for-profit institutions.”
-ENDS-
For further information on Coller Capital’s Global Private Equity Barometer, please contact any of the following:
Shona Prendergast / Mani Pillai: + 44 20 7786 4884 / + 44 20 7786 4814
Penrose Financial, London shonap@penrose.co.uk / manip@penrose.co.uk
Hervé de Laitre: + 33 1 58 650071
HDL Communication, Paris hdl@hdlcom.com
Volker Northoff: + 49 69 95297720
Northoff.Com, Frankfurt volker.northoff@northoff.com
Giangiuseppe Bianchi: +39 02 4851 8891
LOB Media Relations, Milan g.bianchi@lobcom.it
Paget Langford-Hol
Publisher Contact Information:
Coller Capital
+ 44 20 7786 4814
manip@penrose.co.ukCompany profile of Coller Capital
Past press releases of Coller Capital.
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