Study says LPs want more private equity

LPs are clamoring to invest more money into private equity, according to a survey released last month by Coller Capital. The London-based secondary firm’s Global Private Equity Barometer report found that LPs have increased their appetite for private equity over the last six months.

The popularity of hedge funds among LPs is on a slight decline, according to the survey, as only one-third of LPs planned to increase their allocations to hedge funds, down from 37% who were looking to increase investments six months ago.

Similarly, the Coller survey of more than 100 private equity investors found that 44% of LPs worldwide are planning to increase their allocations in private equity, up from 30% six months ago.

In ranking the preferred areas of private equity investments, limited partners chose European buyouts as the number one destination. North American venture funds ranked second, followed by Asia-Pacific buyouts, North American buyouts, Asia-Pacific venture and European venture.

While their enthusiasm for private equity has grown, limited partners are more willing to drop GPs who have not performed well. The survey found that 56% of LPs had decided against re-investing with LPs over the past year, up from 45% in the last survey. North American LPs were the toughest customers, with 65% of them declining to re-up at some point.

The survey found that the alternative asset market has the support of institutional investors. Fifty-five percent of institutional investors plan to increase their allocations to alternative assets over the next year and almost none plan to reduce their allocation. Six months ago, 37% of investors wanted to increase their alternative assets holdings.