Despite growing concerns over valuations, investors remain bullish on private equity, results of a survey conducted by Preqin show.
The survey results reveal that the vast majority of private equity investors surveyed (93%) believe that the asset class' performance has either met or exceeded expectations over the past 12 months, the highest of any asset class.
And while more asset owners are pleased with how private equity has performed, future expectations remain high, with 78% of private equity investors expecting the asset class to either perform as well or better next year vs. the previous 12 months.
"Private equity tops the table for investor satisfaction across alternative assets," said Christopher Beales, private equity analyst at Preqin in a news release announcing the survey results. "Investors feel that private equity has performed well, and we can see that from the high distributions of recent years — private equity funds have consistently produced good returns across all time frames."
However, 79% of respondents said that asset valuations remain the biggest headwind in the year ahead, up from 72% in the survey Preqin conducted at the start of the year. Despite constraints, 40% of investors intend to commit more capital to private equity in the year ahead than they did in the past 12 months.
Middle-market buyout funds are the most popular among private equity investors, with 68% of respondents saying they plan to target these types of funds over the next 12 months. Middle-market buyout funds are followed by growth funds, which are being targeted by 47% of investors. Thirty-four percent, meanwhile, are targeting secondaries funds.
"With fears of a market downturn, investors are planning to commit more capital in the year ahead to help offer good returns in difficult times, so we can expect to see capital keep flowing in over the next year, Mr. Beales said. "But with the rise of interest in growth and secondaries funds, that capital may go to a more diverse range of opportunities than ever before."
Preqin surveyed 177 institutional investors in July. Results can be found on Preqin's website.