Investors Shaking Up Private Equity Through Secondaries, Portfolio Re-Balancing and Recruitment Drive
By Coller Capital, PRNESaturday, June 18, 2011
LONDON, June 20, 2011 -
- One in five of today‘s GPs are now expected to
fail - Investors are scheduling a record volume of secondaries
sales - A quarter of LP staff to change jobs in the next two
years - Half of public pension funds will grow their in-house PE
teams over the next two years
Coller Capital Summer
Barometer 2011
www.collercapital.com/Publications/Publications.aspx
In the wake of the financial crisis, investors (LPs) are driving
rapid change in the private equity industry, including a
wide-ranging re-balancing of their portfolios and the recruitment
of more in-house staff, according to Coller Capital’s latest
Global Private Equity Barometer.
Having had time to gauge the effects of the financial crisis,
the majority (54%) of investors now believe private equity is more
correlated with public equities than they once did - and they now
expect one in five of today’s private equity managers (GPs) to
fail.
However, their confidence in the asset class overall remains
strong. This is reflected in: growing asset allocations (a quarter
of LPs will increase their target allocation to PE in the next 12
months); strong expectations for exits (two thirds of investors
expect to see a significant increase in exits to trade buyers
within the next 12 months); and improved portfolio performance.
With their portfolios recovering from the crisis, almost two thirds
(62%) of all LPs - and approaching three quarters (71%) of North
American LPs - can now report lifetime net returns of 11-15% or
higher from private equity.
Secondaries market
Investor interest in secondaries selling has reached
unprecedented levels. Over one third of North American LPs, a
quarter of European LPs, and as many as 42% of Asia-Pacific LPs
plan to sell private equity assets in the next two
years.
Interest in the secondaries market as a tool for portfolio
re-shaping is visible too in investors’ buying intentions:
around one third of North American and European LPs (30% and 35%
respectively) - and more than two thirds (68%) of Asia-Pacific
investors - intend to buy private equity interests in the
next two years.
Commenting on the
Barometer‘s findings,
Jeremy Coller, CIO of Coller Capital, said: “Investor plans for
secondaries sales show the scale of the change coming to the
private equity landscape. Compare the situation today with three
years ago. One third of North American LPs plans to sell assets
in the next 24 months. Whereas, in the summer of 2008, only
one fifth of investors had ever sold. When you also
look at the proportion of investors looking to buy
secondaries; the flood of money targeting new private equity
markets; and the accelerating pace of recruitment within LP
institutions, it’s clear we are working in a rapidly-evolving
industry.”
LPs as employers
The pace of change within LP organisations is also accelerating.
Currently, three quarters (76%) of LPs have been with their current
employer for five years or more (and 42% of LPs for 10 years or
more) - however, investors believe a quarter of their peers will
change employers in the next two years. This perception is
supported by the plans of individual institutions: around one third
of all LPs plan to grow their private equity teams in the next two
years - including almost half (47%) of public pension funds and 41%
of insurance companies.
The Barometer also has interesting perspectives on LP
incentives. Between half and two thirds of the investment staff at
LP organisations have a performance-related element to their
remuneration - and the majority of those who do not
(including three quarters of North American respondents) believe
they should have one.
Asia-Pacific exposure
European investors are twice as exposed to China and India as to
the more developed private equity markets of Australasia, Japan and
Korea. By contrast, the Asia-Pacific exposure of North American
portfolios tends to be more evenly balanced (with a 53% exposure to
emerging markets vs a 42% exposure to developed Asia-Pacific
markets). Perhaps unsurprisingly, Asia-Pacific investors themselves
have a relatively greater exposure to the developed Asian
markets: this makes up 57% of their Asia-Pacific portfolios on
average.
In fact, the private equity investor community as a whole is
planning to increase its exposure to Australasia and Korea (23% and
18% of LPs respectively). This contrasts with Japan, where overall
private equity exposure will stagnate or even reduce slightly.
Debt markets
Broadly speaking, investors think the private equity debt
markets are functioning well: over half (60%) of LPs believe most
or all high-quality deals are being funded to an appropriate level;
almost two thirds (63%) believe the debt/equity ratio of today’s
buyout deals is about right; and over two thirds (69%) welcome the
recent growth in dividend recaps.
Additional Barometer findings
The Summer 2011 edition of the Barometer also charts
investors’ views and opinions on:
- Re-up refusals
- Operational improvements at portfolio companies
- Sector-specialist private equity funds
- Major challenges to private equity investment in developed
Asia-Pacific markets - Proportion of LP time spent making and monitoring PE
investments
Notes to Editors
LPs (Limited Partners) are investors in private equity funds.
GPs (General Partners) are private equity fund managers.
Coller Capital’s Global Private Equity Barometer is a
unique snapshot of worldwide trends in private equity - a
twice-yearly overview of the plans and opinions of institutional
investors in private equity based in North America, Europe and the
Asia-Pacific.
This latest Barometer captured the views of 110 private
equity investors from around the world during spring 2011.
The Barometer‘s findings are globally
representative of the LP population by: investor location; type of
investing organisation; total assets under management; and length
of experience of private equity investing.
About Coller Capital
Coller Capital, founded in 1990, is the leading global investor
in private equity secondaries - the purchase of original investors’
stakes in PE funds (venture capital, buyout and mezzanine) or the
acquisition of portfolios of companies from corporate
owners/backers. The firm has approximately $8 billion under
management and a truly global reach. Coller Capital’s investments
range in size from $1 million to more than $1 billion. The
firm’s current fund, Coller International Partners V, has capital
commitments of $4.8 billion and participation from 200 of the
world’s leading institutional investors.
Coller Capital’s name is synonymous with the development of the
secondaries marketplace. In 1994, the firm launched Europe’s
first secondaries fund, and in 1998 the first global secondaries
fund. Coller Capital has also been responsible for many of
the industry’s notable transactions, including: the $1 billion
purchase of NatWest’s PE portfolio, from the Royal Bank of
Scotland; the first significant purchase of a corporate venture
portfolio, from Lucent’s Bell Labs; and the acquisition of a $900
million portfolio from Abbey National.
The firm’s recent transactions include: a $1.1bn joint venture
with Royal Dutch Shell; investments with quoted PE players such as
SVG Capital and 3i; and the acquisition of the Bank of Scotland
Integrated Finance portfolio from Lloyds Banking Group.
For further information on Coller Capital’s Global
Private Equity Barometer, please contact any of the
following:
Shona Prendergast / Jade Neal:
+44-20-3128-8584 / 8215
MHP Communications, London
jade.neal@mhpc.com
Melina Etorre:
+33-(0)1-44-50-58-77
Shan, Paris
melina.etorre@shan.fr
Volker Northoff :
+49-694-089-8020
Northoff.Com,
Frankfurt
volker.northoff@northoff.com
Alejandra Moore Mayorga / Belen Carballeda Fernandez
+34-91-531-2388
Grupo Albion, Madrid
.
Tags: Coller Capital, June 20, London, United Kingdom
