Investors bullish on Private Equity - SL Capital Partners research shows

11 May 2010

Institutional investors and pension consulting firms remain bullish on private equity, according to independent research* by Talamore Group on behalf of SL Capital Partners, one of Europe’s largest and most active fund-of-funds managers.

In a perception study conducted during the first quarter of 2010, 89% of respondents stated that they intend to increase or maintain their current allocation to private equity; fully one-quarter plan to increase their exposure to the asset class.

Private equity fund managers interviewed for the study confirmed the continuing importance of funds-of-funds as a source of intelligent long-term capital, with 38% indicating that funds-of-funds are more important to them now than in the past.

Commenting on the findings, David Currie, Chief Executive, SL Capital Partners, said:

"While it has been a tough couple of years for private equity as an asset class, we see continued demand from our institutional investors and, in many cases, an increased appetite for specialised expertise that can identify the private equity funds that will generate the most attractive returns in light of recent market conditions."

Preferred Strategies: Smaller deal focus and secondaries

Smaller middle-market buyouts/growth capital, secondaries, and distressed/special situations were highlighted by institutional investors as the most attractive sub-strategies for private equity. When questioned about future allocations to secondary purchases of private equity funds, 39% confirmed they intend to increase their allocation in the next 12 – 18 months, coinciding with the anticipated return of available deals.

David Currie said:

"We know that small to middle-market buyouts in North America and Europe have historically delivered the potential for higher alpha returns though a combination of greater growth opportunities and continued debt availability. However, the volatility on a deal-by- deal basis is higher, so one needs to ensure prudent diversification of risk through a broader portfolio of fund investments."

"The outlook for the secondaries market in 2010 and beyond is positive. As major financial institutions have made headway in reshaping their portfolios we expect to see a greater number of private equity investments available for sale in 2010."

*The independent research is based on the findings of in-depth, qualitative research carried out by Talamore Group among 44 participants representing 23 major institutional investors, five pension consulting firms and 16 private equity fund managers across Europe and North America. Since its founding in 2004, Talamore has worked with a vast array of prominent U.S., European, and emerging market private equity firms, providing advice on organisational strategy, market positioning, investor communications, and other issues.