Private equity outlook looks good for managers

A survey of nearly 200 private equity (PE) manages has found that many expect to see increased investor allocations over the next 12 months.

The research by Preqin showed managers expect investor appetite from Europe, North America and Asia, with a rise in interest among family offices and public pension funds in particular, but also from private pension and sovereign funds. Previn head of private equity products, Christopher Elvin, commented: “Private equity fund managers are still seeing growing appetite from investors. The portfolio diversification and record returns provided by the industry of late have continued to attract investors to the asset class. Although the fundraising market remains competitive, recent high fundraising levels show that capital is continuing to flow into the market.”

Looking at the impact of the EU referendum in the UK, Preqin surveyed 20 PE fund managers and found 28% think Brexit will have a negative impact on their portfolios over the next 12 months, while 39% were uncertain about its impact on portfolios. Asked about their UK investments in the next 12 months, 44% expect to make fewer investments, while 11% anticipate making more investments. Over the longer term, 50% of the managers said that they were uncertain what the impact of Brexit would be on UK investments. Against this, 30% said that they expect to invest more in the UK over the longer term compared to 20% opting for fewer investments.

Preqin also found that ESG (environmental, social and governance) factors are increasingly important for investors and managers, but with regional variations. For example, 52% of North American PE managers do not consider ESG factors when deciding whether to invest in a company, compared to 18% in Europe. In addition, larger PE managers are more likely to take ESG factors into account.