LP Interest Remains High For Venture, Small Cap Buyout Funds


A December study offers mixed messages to private equity managers raising new funds.

Overall, the vast majority of limited partners say they expect to maintain or increase their allocations to private equity in 2013, the new survey from Preqin finds. The exact number is 76%. However, expectations appear less sanguine than a year ago. The 15%, for instance, who said they expect to commit “slightly more” capital is down noticeably from last year.

The funds attracting the most interest from LPs are those targeting small-cap and mid-market buyouts, the study found. Slightly more than a third of LPs see these funds as offering the best investment opportunity in private equity. Just over half of the investors surveyed said they expect to invest in this asset class.

Venture came in second in terms of investment intentions. Almost a third of LPs said they plan to invest – 28% in fact – though only 17% said they viewed it as the most attractive place to invest. This was fourth on the list of most attractive investments after small-cap and mid-market buyout, distressed opportunity funds and large-scale buyout.

Distressed opportunity funds, large-scale buyout funds and secondary market vehicles all drew relatively strong investment intentions from LPs.  Twenty-three percent of LPs said they plan to invest in each asset class. Of the three, distressed was seen as the most attractive category in which to put money.

Preqin also found that the fundraising market remains active. The research firm says 1,940 private equity funds are on the road worldwide hoping to raise $795 billion. This is up 7% from 1,814 active funds a year ago.

Almost half of the funds are North America based. A quarter of them are from Europe.

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