Listed private equity gains support

Over half of wealth managers will increase their exposure to listed private equity in the next 12 months, according to the latest pan-European survey conducted by LPEQ.

The findings revealed that newcomers are also looking at the area with 13% of respondents stating they plan to invest in listed private equity for the first time. Awareness of the investment space has also increased by 45% and only 11% plan to decrease their allocation.

Two hundred wealth managers responded to the survey and the majority (79%) declared that portfolio diversification is the main draw of the space. The ability to access an asset class otherwise only available to the largest investors was also an important factor.

The survey provided good news for the private equity industry in general. Despite unfavourable market conditions wealth managers have confidence in the private equity industry, with 64% of all respondents and 75% of LPE users, believing that private equity outperforms over a market cycle. Over 60% of respondents agree that discounts of LPE shares are creating a buying opportunity.

Andrea Lowe, principal at LPEQ said: “The big picture shows that wealth managers have to adjust their allocations. We still need to reach people with information that is easy to understand but we were pleasantly surprised that so many people are considering LPE and are noticing that there are many compelling opportunities in this space.”

But obstacles still exist for the 13% who plan to increase their LPE allocation. Nearly half of the non-users surveyed revealed that they had not invested because their investment mandate or job description prohibited them from doing so.

Confidence in LPE is also waning as long-term performance plummeted from 73% in 2007 to 40% in 2009. For those that are considering investing, improved communication is necessary as less than half of respondents admitted to having sufficient information to make an investment decision about LPE.

Director of Dunedin, a listed private equity vehicle, Brian Scouler said: “That 40% figure is much more realistic. Private equity managers are going to have to go out and explain that we are well placed in terms of cash resources, that we have smart managers and that we are able do a lot during ownership.”