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German insurers to increase PE allocations

According to a study carried out by German fund-of-funds manager, Golding Capital Partners, on average German insurance companies intend to increase their private equity allocation fourfold, despite the uncertain economic outlook.

Jeremy Golding of Golding Capital Partners said: “It’s rewarding to start the year on a positive note and encouraging for us, as these investors are our target market and the mood is positive.” Insurance companies plan to increase their allocation from an average of one per cent today to four per cent over the next two to five years. Of the insurance companies surveyed, 43 per cent have already invested in private equity via fund-of-funds vehicles and 50 per cent of those who have not are now considering first time commitments. Of the banks and asset managers 30 per cent had already invested and 27 per cent are considering it.

The aim of the research was to discover how investors perceive the market for private equity products, particularly fund-of-funds. Between September and November Golding Capital Partners surveyed managers responsible for asset management at 30 insurance companies and 33 private banks and asset managers. The majority of those interviewed (two-thirds) remain undeterred by the current difficulties facing the private equity market. Expectations are that recent stock market turmoil will have only short, or at worst, medium term implications for non-quoted investments.

Golding says the investors interviewed are making fewer direct fund investments. He believes that investors’ preference to participate in private equity through fund-of-funds vehicles demonstrates that they appreciate the complexity of the asset class. Golding, a veteran of GE Capital, Boston Consulting Group and KPMG, is managing director of the firm, which has advised on the placement of around E100 million in private equity funds over the last 18 months.

He said: “The relatively embryonic private equity culture in Germany still has considerable potential and the real growth years appear to still lie in front of us.”