The majority of global private equity investors, 89%, expect to earn an annualized internal rate of return of more than 11% and 27% expect to achieve more than a 16% IRR from their portfolios over the next three-to-five years, according to Coller Capital's Global Private Equity Barometer, a biannual investor survey.
"I think it's reflective of LPs views that this (private equity) is still a pretty compelling place to invest capital, said Eric Foran, a partner with Coller Capital, in an interview. "The return expectation is across all private equity strategies so a lot goes into that number."
He added that a 11% IRR is "a reasonable bar for private equity" and so that he wasn't surprised to see a high percentage of limited partners indicate they expect to earn 11% or more.
Fifty-six percent of European private equity investors indicated that environmental, social and governance factors have played a major role in rejecting fund commitments. Thirty-three percent of investors in the Asia-Pacific region have rejected fund commitments on ESG grounds and 25% of North American investors have not made a private equity commitment based on ESG factors.
The survey also showed that the majority of survey respondents, 73%, believe that hedge fund investments in early stage companies will underperform "VC (venture capital) industry norms." One percent of investors indicated they expected hedge fund investments in young companies would outperform venture capital norms.
Meanwhile, 39% of survey respondents stated they will begin monitoring the social media accounts of individual general partner executives as part of their due diligence, 32% indicated they are unlikely to monitor GP executive's social media accounts and 29% stated that monitoring social media accounts is already part of their due diligence process.
Coller Capital conducted the survey from Sept. 28 to Nov. 9. There were 109 respondents, made up of pension funds, insurance companies, sovereign wealth funds and banks.