LPs seek sector specialization, especially in healthcare: survey

  • One in five investors say they are building additional expertise within specific industry sectors
  • Healthcare and pharma will provide attractive opportunities in the next three years
  • Health was popular among venture investors as well

Many limited partners are seeking additional expertise in specific industry sectors, and a majority see healthcare and pharma as areas rich in opportunity, according to a new survey.

Nearly one in five LPs are planning to allocate additional resources to sector specialization, according to Coller Capital’s Global Private Equity Barometer for winter 2018-2019.

Coller surveyed 100 private equity investors in North America, Europe and Asia-Pacific for its survey.

LPs planning to focus on specific industry sectors will do so with a mix of internal and external resources, according to the survey.

Nine percent of investors told Coller they planned to add sector-specific expertise through internal team recruitment, 3 percent planned to hire external consultants or advisers, while 7 percent said they would seek internal and external expertise.

Among LPs in the survey, healthcare and pharma are the most popular industry sectors, followed by business services and IT.

Asked to predict which industries will provide the most attractive opportunities for North American and European private equity in the next three years, 88 percent chose health and pharma, 82 percent chose business services, 75 percent chose IT, 66 percent chose biotech and 62 percent chose financial services.

LPs were less bullish on hydrocarbon-based energy and consumer products, with just 40 percent and 33 percent, respectively, saying they saw attractive opportunities for PE in those industries.

LPs are increasingly turning to specialist managers, especially in areas like tech and healthcare, Buyouts research has found. Tech funds raised about $6.6 billion through the third quarter, while healthcare-focused pools collected $6.25 billion.

Coller’s survey also found that LPs are increasingly interested in turnaround funds and distressed debt, with 17 percent of investors planning to increase exposure to turnaround and 23 percent seeking to boost exposure to distressed debt funds.

Along these lines, more than half the investors said they’re adjusting investment strategies to prepare for the next market downturn. Seventy percent said private equity-backed companies will prove more resilient when the downturn comes.

Action Item: Check out more of Coller Capital’s recent findings here https://bit.ly/2E8rz6I