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The Private Equity Plans of Endowment Plans

Preqin recently contacted 100 endowment plans to ask them about their current views of private equity and whether their plans for the asset class had changed in light of the financial crisis. Going forwards, some endowments have opted to focus on a particular area of the private equity market, with distressed private equity, venture, and small-to-mid market buyout being the more preferred fund types by endowments; cited by 34%, 30%, and 24% of endowments respectively.

Just under a third of endowments were of the opinion that there were no particular areas of the private equity market which currently represent the best opportunities available. In support of this, 18% of endowments stated that they will not be focusing on a particular area of the private equity market, with some of them choosing to invest opportunistically in the private equity asset class – one Ohio-based endowment stated that “good investment opportunities can be identified, despite the crisis.”

Of the types which would be focused on by endowments, distressed private equity and small-to-mid market buyout are believed to be the areas which represent the best opportunities, with 38% and 17% citing so respectively. Mega-buyouts were stated to represent the best opportunities by only 3% of endowments with slightly more than double that (7%) stating that it would be an area of focus going forward.

In terms of the geographic focus of the investments of endowments in private equity, Preqin found that North America is still the most preferred region for investment, with 93% of endowments previously investing there and still looking to invest in the region, and another 1% now looking to invest in North America having never done so in the past. Going forwards 83% and 81% of endowments are looking to invest in the regions of Europe, and Rest of World respectively.

Additional results from this survey are presented in Preqin’s October edition of private equity Spotlight, while the full research report is due to be published in coming weeks. To register to receive Spotlight, please click here.

Posted by Dami Sogunro on 20-Oct-2009

Keywords: private equity, endowment plans, survey