LPs expect Asia to underperform North American, European buyouts – Coller Barometer

More than 80% of respondents said they were targeting annual net returns of at least 11% from their PE portfolios, with one quarter anticipating returns of 16% or more. They are most bullish on North American buyouts - 90% expect 11% or more - followed by European buyouts and then Asia Pacific buyouts. However, of the 75% that expect Asia to deliver returns in excess of 11%, more than half anticipate at least 16%.

Sentiment is weaker on Asia Pacific venture, with fewer than 50% of respondents expecting 11% or more, while more than one fifth are looking at returns below 5%. Only European venture and fund-of-funds and generalist funds are expected to perform worse.

Performance expectations are reflected in allocation plans, with the majority of LPs looking to increase commitments to North American and European mid-market and small buyout funds in the next 2-3 years, although appetite for large buyout funds is dwindling.

Private equity fares well in the survey compared to real estate and hedge funds, with 37% of respondents planning to increase allocations over the next year while only 14% are looking to scale back. Fairly equal proportions of investors said they would likely increase and decrease allocations to real estate and hedge funds.

More than half of LPs expect distributions from GPs to accelerate over the next 12-18 months, with only 10% predicting a deceleration. They also appear to be comfortable receiving these distributions in the form of dividend recaps, with more than two thirds saying the current level of recaps is appropriate at this point in the PE cycle.

In order to capture increasing opportunities for co-investment, private equity teams are likely to expand over the next 12-18 months. Nearly half of sovereign wealth funds, insurance companies and asset managers said they would add headcount, with one quarter of public pension funds planning to do the same.

Over half of respondents said they had co-invested with GPs in the last two years and direct commitments on average now account for 10% of total private equity exposure. This is expected to increase to 15% in the next 3-5 years.

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• Topics
• LPs
• Performance
• Coller Capital
• Asia
• Performance
• LPs