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Family Offices and Endowments’ Muted Expectations for PE

by

November 6, 2014

Endowments and foundations in the US continue to invest in PE but only 10% of respondents expect higher returns going forward, with the remainder believing that returns will be more muted, according to the latest poll by NEPC, an investment consulting firm for endowments and foundations.

 

Driving expectation down is the view that current valuations of companies are too high for PE funds to achieve great returns, while 23% felt their own limited access to top funds was an obstacle. Fund terms and limited opportunities are also concerns amongst 17% and 14%, respectively.

 

The majority (57%) is targeting growth equity fund investment, with buyouts close behind at 47%. One-third of respondents are eyeing emerging markets, with 52% looking at China-only strategies, 48% responded that they’re looking to Asia ex-China; 22% each to Latin America, Eastern Europe and Middle East / Africa; and 39% to “all of the above,” which indicates that investors see opportunity across all emerging markets, not just Asia.

 

Endowments and foundations favor tapping emerging markets through funds of funds (48%), while 30% plan direct investments, and 22% will allocate to both funds of funds and direct investments.

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