Nearly 90% of private equity investors surveyed recently by private equity firm Coller Capital Ltd. believe that take-private transactions can work on a case-by-case basis. Among North American investors, 98% of investors support take-privates.
Coller Capital, which specializes in secondary transactions, or acquiring interests in private equity funds and portfolios of private companies from their original owners, also found that most limited partners, or LPs — 80% — see general partner-led secondary transactions becoming a regular feature in private equity. The results were released in the summer edition of the firm's twice-yearly "Global Private Equity Barometer."
Almost two-thirds of respondents said that innovation in the private equity space is strong.
About 60% of investors said they have committed to the first closings of private equity funds over the last two years due to strong competition with other LPs for spots in the fund, and 55% said this fear of missing out is more prevalent today than it was several years back, according to Coller Capital. The survey found that 58% also cited incentives offered by general partners, or GPs, as a reason to commit at the first close.
Half of private equity investors said they are actively diversifying their private equity portfolios by geography, while 46% said they are diversifying by vintage year. Industry sector, investment stage, and specialist investment theme are being targeted for diversification, each by about one-third of respondents.
In terms of where LPs plan to increase their target allocations to alternative assets over the next 12 months, 51% named infrastructure, and 40% flagged private debt/credit. Private equity received 29% of responses, real estate 27% and hedge funds 12%. Hedge funds received the largest percentage — 16% — of investors indicating they planned to decrease allocations.
Almost two-thirds of investors indicated that there are too many GPs targeting buyout deals in North America, compared with 50% for Europe and 26% for Asia-Pacific. About half of investors said the right amount of GPs are targeting buyouts in Europe, and 43% of investors said the same about Asia-Pacific. More than 30% of investors see too little GP activity targeting buyouts in Asia-Pacific.
Of the Asia-Pacific buyout markets, investors on balance said Southeast Asia will be the most attractive in the coming three years, followed by China and Japan.
With regard to funds of funds, 71% of investors said they remain an attractive option, with most investors indicating that they remain more useful for investing in emerging markets, specialist/niche themes, and venture capital in developed private equity markets.
When asked whether environmental, social and governance issues played into investment decisions, responses between North American and European LPs were split. Nine percent of North American LPs said ESG was an essential component to their investment decision-making process, while 30% said it was a small or negligible piece. In Europe, 39% said ESG was essential, and 9% said it was not.
As for which component of ESG was most critical, 66% said all three were weighted equally. A quarter said governance was the most important, while 5% named environmental and 4% said social.
Coller Capital's survey included 112 private equity investors from organizations including bank/asset managers, insurance companies, public pension plans and corporate pension plans. More than 50% of investors have more than $20 billion in total assets under management, and the majority of investors surveyed have been involved in private equity investing since before 2009.
