LPs are increasing their allocations to PE after some significant retrenching in the wake of the global financial crisis, according to Coller Capital’s latest PE Barometer report. More than three times as many LPs (30%) plan to increase their target allocation to private equity over the next 12 months as to reduce it (9% of LPs). One third of investors are accelerating their commitments to PE.
Investors in PE are upbeat about returns despite expecting loan defaults amongst PE backed firms in Europe and greater skepticism about Asia-Pacific dealmaking conditions. A large majority (80%) of investors, expect net PE returns of greater than 11% over the next 3 to 5 years. The report has some sobering sentiments. For example, half of North American LPs plan to reduce their number of GP relationships in the next two years, while two thirds of LPs expect buyout default rates in Europe to increase over the next 2 to 3 years, and 43% of private equity investors think the risk-reward equation in China is getting worse.