Twenty percent of North American LPs not yet invested in UK private equity plan to back UK venture capital funds over the next two years.
Research published by the British Private Equity and Venture Capital Association (BVCA) and conducted by research house Preqin shows that just 5% of global investors in private equity funds plan to reduce their allocation, whilst 15% plan to increase. The remainder are anticipating no change.
Investor expectations of returns from private equity over the next five years are split: 38% expect returns to be in the 10% to 15% range over the next five years, with 37% expecting returns between 15% to 20%.
Despite a comparative lack of deal making in recent years, 87% of respondents expect that funds with vintage years between 2008 and 2010 will enjoy strong returns, reflecting investor confidence in the ability of private equity to take advantage of an economic downturn.
A significant majority of investors (87%) believe that private equity funds raised in the years 2008-2010 will generate strong returns.
The other major finding of the survey was that 35% of investors expect a medium-term change in the tax environment in the UK, with 52% expecting this tax change to negatively impact on returns.
Simon Walker, chief executive of the BVCA, said: “The long-term nature of private equity, its excellent performance historically when investing during a downturn and the alignment of interest it promotes are all extremely attractive qualities for investors. It is also heartening that North American investors view the UK market favourably and plan to increase investments, a finding which EU policymakers and British officials should heed considering the damage that would be done to the attractiveness of the UK as an investment destination if the AIFM directive was to pass in its current form.”