Fifty-nine percent of investors expect to keep their private equity allocations the same, while 24% anticipate increasing their allocations over the next year, according to private equity firm Coller Capital's Global Private Equity Barometer.
Seventeen percent of private equity investors plan to decrease their private equity allocations.
For returns, 24% expect returns between 16% and 20%, while 9% expect to earn more than 20% in the next three to five years. Before the 2008 recession, 32% of investors anticipated returns of 11% to 16% and 6% expected to earn more than 20%, according to Coller Winter 2007-2008 Barometer.
Investors expect to commit much of their capital over the next two to three years to small-market and midmarket buyout funds. Some 37% of private equity investors in North America plan to increase commitments to small buyout funds, which invests in deals of $200 million or less, while another 32% plan to commit to midmarket funds.
Most investors, 69%, do not expect to change their exposure to private equity in Europe as a result of the sovereign debt crisis. Another 11% expect to increase exposure while 20% plan to decrease their European private equity exposure.
About half of investors surveyed said they have so-called zombie funds — funds that have no hope of earning a profit — in their private equity portfolios. Fifty-seven percent of North American investors, 41% of European limited partners and 50% of Asian-Pacific investors indicated they have zombie funds in their portfolios.
“It's a mixed picture. Investors still believe in private equity,” said Frank Morgan, partner in the New York office of Coller Capital. “Lehman Brothers was a wake-up call for investors. They are taking longer to do due diligence. Fundraising is taking longer. Investors are not participating in first-time closings with (general partners) as they have in the past. All that kind of thing says people are behaving cautiously and taking their time.”
The survey was taken of 107 private equity investors worldwide in August and September by IE Consulting, a division of Initiative Europe.