(February 21, 2013) — Investor interest in large to mega private equity buyout funds is on the rise, research by data firm Preqin has shown.
The firm found that 23% of investors are targeting large to mega buyout vehicles in 2013, compared to 9% in 2010.
The news is encouraging for fund managers looking to raise capital from limited partners for these vehicles, according to Antonia Lee, Preqin’s manager of private equity investor data. “Investor interest in emerging markets also remains strong, with 60% of LPs currently investing in emerging markets and a further 14% considering doing so in the near future,” she added.
Geographically-speaking, 49% of LPs feel that Asia is the most attractive region for investment within emerging markets.
At the same time, 19% of investors see large to mega buyouts as presenting the best investment opportunities, compared to 15% in December 2011.
“Despite fewer investors making new commitments in 2012 combined with continued economic uncertainty and other challenges facing the asset class, investor appetite for private equity remains strong,” said Lee. “The 85% of investors interviewed by Preqin that stated their private equity investments have met or exceeded their expectations is an improvement compared to December 2011, when 81% of investors provided the same response.”
Lee noted that the majority of LPs (54%) expect returns from their private equity investments in excess of 400 basis points over public markets, with LPs continuing to view private equity as an asset class that can offer superior performance in the longer term.
Earlier this month, research by the Private Equity Growth Capital Council’s (PEGCC) Private Equity Index (PE Index), which measures overall private equity activity in the US, showed that private equity investment expanded during the fourth quarter of 2012 to a level not seen since before the financial crisis.
“Private equity activity was a bright light in the United States economy during the fourth quarter, increasing investments in promising companies poised for growth and in need of a turnaround,” said Bronwyn Bailey, PEGCC Vice President of Research, in a statement. “In the fourth quarter, economic activity receded, yet private equity investment topped $102 billion and returned more than $55 billion in the fourth quarter to its investors which include pension funds, charitable foundations and university endowments.”
Read the full report by Preqin here.
Related video: The ‘Misperception’ of Alternative Investments