Private equity houses losing favour in deals

Michael Bow
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INSTITUTIONAL investors are looking to bypass private equity firms in future and make more direct investments, amid growing concerns over the transparency of information from private equity houses.

A heavyweight survey by M&A data provider Mergermarket and advisory firm Duff & Phelps shows over two-thirds of limited partners are looking to increasingly bypass private equity companies and go it alone in search of better returns and lower fees. The figures will alarm large private equity houses struggling to raise money from investors for future buyout funds.

The survey, which interviewed 100 investors from North America and Western Europe, found 70 per cent of respondents also thought transparency was a key concern, with a further 63 per cent saying timeliness of reporting was a common problem.

The illiquidity of private equity investments make them notoriously hard to value, leading to shortcomings in delivering values to investors.

Fund of funds, pension funds and sovereign wealth investors were all polled in the survey. Most were optimistic about the industry, but 33 per cent said they had no plans to increase current allocations.