Investor Demands on Private Equity Returns Increase Significantly

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Study reveals increasing returns expectations relative to public markets

Interviews conducted by Preqin with over 100 leading investors in private equity funds reveal that demands on private equity portfolios are now higher than ever before relative to public markets. 63% of investors expect to receive returns of more than four percentage points over public markets at present. In comparison, just 17% of investors interviewed in December 2007 shared these expectations. These findings come as investors prepare to ramp up activity in private equity during 2011 to take advantage of opportunities in the market.


Other key findings following Preqin’s interviews with 100 leading investors include:

• In pursuit of higher returns, investors are becoming increasingly receptive to forging new fund manager relationships. 71% of investors are considering investing with managers they have no prior relationship with in 2011 compared to 59% the year before.

• Fundraising activity was low in 2010 but 2011 will see the return of many investors to the market. 62% of investors interviewed expect to make new fund commitments in 2011 and a further 30% have yet to finalize their plans for the year, suggesting the proportion active in 2011 could be much higher.

• Investors are making more capital available for private equity investments in 2011 to take advantage of attractive opportunities: 54% expect to commit more capital to funds in 2011 than in 2010.

• 90% of investors interviewed intend to increase or maintain their private equity allocations over the next three to five years, showing continued appetite for the asset class in the longer term.

• Key areas of interest for investors in 2011 include small to mid-market buyout funds and distressed private equity, which are seen as attractive by 55% and 20% of investors respectively. 70% currently invest in or are considering investing in emerging markets.