LONDON (Reuters) – Aviva Investors is seeing a lukewarm response to its new private equity fund of funds as wary investors look to avoid any risk in the wake of the credit crunch.
Philip Pearson, head of alternative investments business development told Reuters: “What we are hearing from investors is they still like the area of alternative investment, but given what has happened since the credit crisis started, they feel the need to take stock and review the situation.”
Increasing numbers of private equity funds are struggling to reach their fund raising targets. Research from consultancy Preqin last month showed that some 1,600 funds were activley seeking capital, up from 1,300 in January.
Unlike traditional closed-end private equity funds which lock investors in for a 10-year cycle, Pearson said Aviva’s perpetual fund will be more liquid as it gives investors the chance to exit or commit new funds on an annual basis.
Aviva Investors, the asset management arm of insurer Aviva Plc (AV.L: Quote, Profile, Research, Stock Buzz), started seeding the fund of funds with two key investors earlier this year, one of whom is an internal Aviva client, and is now starting to sell the product to more external clients.
The fund currently has some 30 million euros of assets under management, though Pearson sees the opportunity for the fund to invest up to 400 million euros a year.
“There is real hesitation about committing to risk-bearing assets,” he said.
He added there is significant increase in risk aversion by potential investors, twinned with a “suspicion the rules of the game have fundamentally changed”.
By Simon Meads
(Editing by Simon Jessop)