Private equity investors turn away from core funds in hunt for
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[June 10, 2014]
LONDON (Reuters) - Investors in private
equity are turning their backs on established funds and
increasingly putting their money in new vehicles and
individual deals as returns struggle to regain
pre-crisis highs, a survey showed on Tuesday.
Over the next two years, more than four-fifths of investors in
private equity will decide against reinvesting in managers whose
last two funds they backed, data from secondary market investor
Coller Capital showed.
"It is a picture of experimentation and change across private
equity," a Coller Capital spokesman said.
"LPs (investors) have come through the crisis and there's real
confidence with private equity as an asset class, and they're
experimenting with how and who they invest with."
Returns on investments have begun to recover since the crisis, with
almost a quarter of investors making annual net returns of 16
percent or more, nearly double the proportion a year ago, with U.S.
investors seeing the best gains.
But that level remains significantly below the high of around 45
percent shown in 2007.
Coller's Global Private Equity Barometer showed a shift away from
long-held investments could be to the benefit of first-time funds.
More than two-thirds of U.S. investors are planning to back
first-time funds via direct investments in the next two years, the
vast majority in developed markets, it said.
Investors are also looking at putting their money into individual
deals rather than funds. Since the start of the financial crisis,
almost a quarter of investors have backed managers on a deal-by-deal
basis, the report showed.
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U.S. investors are the most worried about debt levels in deals.
Two-thirds believe an oversupply of leverage is resulting either in
poor-quality deals or too much debt being poured into high-quality
deals, compared with just over a fifth of European investors with
the same concerns.
(Reporting by Freya Berry; Editing by Mark Potter)
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