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LPs would like more vigorous defense of PE industry: Coller

Coller Capital spoke to 113 private equity investors for their twice-yearly report on trends in the industry.

Over three-quarters of limited partners would like to see private equity and venture capital industry associations do more to defend private equity, according the latest Global Private Equity Barometer report released last week by Coller Capital.

The report surveyed 113 private equity investors, 39 percent in North America, 39 percent in Europe and 22 percent in Asia.

Around 76 percent of LPs said more needs to be done to protect private equity’s “license to operate,” while 24 percent believed what is being done is adequate.

LPs also believe that criticism of private equity by politicians and the media has grown more strident. Massachusetts Senator and Democratic presidential candidate Elizabeth Warren has been the most vocal, introducing a plan to crack down on some of the industry’s core practices and calling out their investments in the private prison industry.

Private equity leaders Howard Marks of Oaktree Capital Management and James Zelter of Apollo Global Management both recently sounded off on Warren’s positions, as Buyouts reportedBuyouts also covered a recent congressional hearing on private equity.

Buyouts recently examined LP support of firms that Warren called out for their investments in the private prison industry.

The Coller report found a majority of LPs worldwide think GPs should be required to be more open with stakeholders on the decision or actions they take with portfolio companies. Around 54 percent say accountability is important for private companies as well as public. But the report said North American investors were split on the issue, while 56 percent of European LPs and 61 percent of Asian LPs support greater transparency.

Co-investments

Interest among LPs in co-investments has grown, especially from larger ones. About 69 percent of LPs co-invest alongside their GPs at least sometimes, while 19 percent said they prioritize commitments to GPs likely to provide co-investment opportunities. Of LPs with more than $50 billion in AUM, 84 percent said they are proactive in seeking out co-investments.

There were a wide variety of reasons LPs were restrained from co-investing: 39 percent of LPs told Coller they did not have the resources to meet their managers’ deadlines to co-invest; 28 percent said they make enough co-investments versus their asset allocation; and 22 percent said competition between LPs for good co-investment stopped them from doing more.

Action Item: Read Coller Capital’s Winter 2019-20 Global Private Equity Barometer here.