Investors in private equity funds are planning to plough even more money into the asset class over the next 12 months, according to a new survey, after a record year in 2017.
These institutional investors, surveyed by adviser Rede Partners which helps match private equity funds with investors, are also expecting to get “significantly more” back from fund managers via distributions over the next year, as assets bought in the post-crisis years continue to be sold by funds in an altogether more buoyant market.
The 166 investors surveyed by Rede Partners, which have more than €6.4 trillion (£5.7 trillion) in assets under management, currently have around €1.3 trillion allocated to private equity.
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“On the back of another record year for fundraising, investor sentiment towards private equity has gone from strength to strength,” said Rede Partners’ Adam Turtle.
“Global investors continue to reap the benefits of strong performance over the past few years and this is leading to increased allocations to private equity.”
Yesterday London-headquartered firm Equistone, which has previously backed companies such as Kurt Geiger and Jack Wolfskin, closed its latest fund above the €2bn target at a hefty €2.8bn.
There were also signs of hope for newly established private equity firms, as the survey showed strong investor support for initiating fresh relationships with fund managers. This is in contrast to 2017, where much of fundraising was dominated by re-investing in the latest fund raised by existing managers.
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“That is the good news,” said Turtle. “The bad news is that it is fiercely competitive and investors are time poor. [Fund managers] looking to raise new funds must focus on articulating a clear, compelling and distinctive investment case in order to gain attention and be successful.”
The strongest support for private equity came from investors based in the Nordics, the UK, Benelux and the US. Contrary to last year, US investors were actually more positive about the asset class than their European counterparts.
“Through a year of tax reform, buoyant equity markets and political uncertainty, investments in the asset class have outperformed,” said Rede Partners’ Scott Church.
“As equity volatility has been reintroduced to the market in 2018, we can expect institutional investors to continue to allocate to private equity over the coming months to anchor more stable returns.”
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