Poll: PE Investors Expect Lower Returns

LONDON (Reuters) – Investors in private equity funds see returns falling from recent heady levels but remain confident they will stay within the 15 to 20 percent range, research and consultancy group Preqin said.

Private equity investors have enjoyed exceptional returns in recent years as readily available debt allowed them to exit investments at high valuations.

But as debt for deals dries up and company valuations fall, private equity funds are expected to hold onto their assets for longer until exits can be achieved at favourable levels.

Preqin said a poll of 100 private equity investors worldwide showed they expect gross returns to be about 150 basis points lower in the coming five years than in the past five years, with the average return seen at 17.4 percent.

Billy Gilmore, investment director at Scottish Widows Investment Partnership’s private equity arm, echoed those findings in comments to Reuters earlier this week. He said: “I think we are in period where holding periods are going to be longer so, other things being equal, internal rates of return are going to decline.”

“We still feel it is possible to make substantial money multiples in private equity,” he said, adding he expects private equity to continue to outperform the stock market over the long term. (Reporting by Simon Meads; Editing by Erica Billingham)