NEW YORK — Private equity investors are worried about style drift and declining returns but more than a third still expect to increase their allocations, according to the Global Private Equity Barometer, a semiannual survey of private equity limited partners by Coller Capital Ltd.
The survey reported that 49% of institutional investors plan to increase their allocations to alternative investments in the coming year, with 38% planning to increase their allocations to private equity and 40% expecting to increase their hedge fund allocations. Two percent of alternative investment investors, 3% of private equity investors and 10% of hedge fund investors plan to decrease their allocations and the rest would keep their allocations the same.
Eighty percent of survey respondents expect a significant number of new investors to invest in private equity over the next three years. Some 68% stated they thought new investors would be motivated to invest in private equity by higher returns; 32% thought diversification would be their prime motivator.
Returns over the lifetimes of portfolios held by private equity investors have been fairly consistent, said Frank Morgan, president and chief operation officer of Coller Capital-U.S., New York. However, lifetime portfolio returns this year dropped. Only 41% of investors reported net returns over the lifetime of their private equity portfolios of 16% or greater; last year, nearly 45% reported returns at that level.
Within their private equity portfolios, 58% of all investors stated that the European buyouts portion of their portfolios returned 16% or more; 45% of North American buyouts returned 16% plus; 33%, funds of funds and generalist funds; 24%, North America venture capital; and 11%, European venture capital.