Returns offered by private equity are attractive to pension funds, but many have been hit by the poor fund performance of some private equity funds, says efinancialnews. It has led to several new trends in PE investment as institutional investors seek less traditional approaches for achieving returns in PE. For example, they are showing appetite to diversify fund types.
They are switching from large buyout funds to specialist funds run by managers that can pick and navigate deals on a specific theme. Other pension funds could also diversify away from typical European buyout funds towards emerging markets and venture funds to generate returns, according to the report.
“Buyout funds raised during the boom era have suffered from underperformance and, in some cases, firms have lost control of some of their portfolio companies,” says the report. The secondaries market is also a growing favorite of pension funds, particularly those seeking to sell certain investments and free up capital to reinvest elsewhere