Investors shied from new private equity commitments
The majority of investors in private equity funds chose not to make new commitments to the asset class in the first half of this year as investors continued to suffer liquidity problems.
In a bi-annual investor sentiment survey of 100 institutional investors, which was published yesterday, data provider Preqin said that 59% of investors made no new investments in private equity in the first half of the year because of a lack of distributions from funds.
The reduction lead to a drop in fundraising with 89 funds raising an aggregate $79.7bn in the second quarter of the year, down from $194.5bn across 274 funds in the same period last year.
Helen Kenyon, manager of investor data at Preqin, said: “Investors have displayed an increasing degree of caution when approaching new commitments to private equity funds in recent months. The decline in the rate of distributions from portfolio funds has also meant that, though the majority of investors are intending to maintain the level of their exposure to the asset class, they are not at present under the same pressure to make new commitments to achieve this.
“This, combined with current market uncertainty, meant almost half of investors have opted not to invest this year. Despite this, certain areas of the private equity market have still drawn lots of support from investors, in particular distressed private equity, clean-tech and secondaries funds.”
Preqin said it expected investor appetite for private equity to remain strong in the long-term with 30% of investors intending to increase their target allocations to the asset class in the next three to five years.
It added 54% of investors expected to make new commitments to private equity funds in the second half of the year while a further quarter will recommence investment in private equity next year.
-- Write to Jennifer Bollen at jbollen@efinancialnews.com
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