More than half of international institutional private equity investors — 55% — expect to increase their allocations in the next 12 months, according to the winter 2005-2006 Global Private Equity Barometer by secondary private equity investment manager Coller Capital. Overall, 44% of the investors said they plan to increase their private equity allocations, compared with 30% who plan to raise their hedge fund allocations.
North American investors are less interested in private equity and hedge funds than European or Asia-Pacific institutions, according to the survey. Only 35% of North American investors expect to increase private equity allocations, and 22% plan to raise their hedge fund allocations. Fifty-two percent of Asia-Pacific investors and 48% of European investors expect to increase private equity, while 45% of Asia-Pacific investors and 31% of European investors plan to increase hedge fund allocations.
Also, 57% of North American investors expect to increase their private equity emerging markets allocations within the next three years, but only 16% currently invest in emerging markets. Specifically, investors said they are interested in India, Central and Eastern Europe, China, Hong Kong and Taiwan, Frank Morgan, head of Coller's New York office, said in an interview.
At the same time, 92% of North American survey respondents said the increased amount of capital available and the additional competition for the best investments would negatively affect returns for funds being raised now, and 74% said they are concerned about the growing size of buyout funds, noted Mr. Morgan in the interview.
While 70% of North American investors expect hedge funds to invest in private equity in the next 12 months, only 31% anticipate hedge funds will continue to compete with private equity funds in the long term.
Responses came from 109 institutional investors, including public pension funds, corporate pension funds and endowments and foundations.