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Changes in the Top 100 Private Equity Investors over the Last Year – April 2013

by Victoria Pitman

  • 30 Apr 2013
  • PE

Preqin currently tracks nearly 5,000 firms investing in private equity. In March 2012, we analyzed the makeup of the top 100 investors in the asset class by allocated capital. Although this group has maintained their total assets under management at $13tn, along with their aggregate allocation to private equity at $1.2tn, the composition of the top 100 investors has changed significantly over the last year.

The proportion of fund of funds managers included in the top 100 investors has dropped from 50% to 43%. In contrast, public pension funds and asset managers have both increased their proportions by two percentage points, to 23% and 11% respectively. Private sector pension funds and sovereign wealth funds now each account for 5%, having both increased their proportional representation of the private equity investor universe by one percentage point. The proportion of banks has halved, currently comprising just 2% of the top 100. Over the last year, the top 100 investors by capital allocated to private equity has seen the inclusion of a government agency (CDC Entreprises), an investment bank (Mizuho Corporate Bank) and an investment company (Fonds de Solidarité des Travailleurs du Québec), investor types that were previously absent. The remainder of the top 100 is made up of foundations and endowment plans (5%), and insurance companies (3%), the proportions of which have remained constant over the time period.

In the same way, the breakdown of investors by geography has also changed over the last year. The percentage of investors based in North America and Europe has fallen, with 64% of the top 100 based in North America and 26% based in Europe, representing decreases of five and three percentage points respectively. Last year, investors based outside of these regions collectively accounted for just 2% of the top 100. Over the last 12 months, investors based in China and the Far East have come to represent 5% of the group, with a further 3% being based in Australasia, and 2% based in the Middle East.

Unsurprisingly, the preferences of the top 100 investors in private equity have also changed in the last year. Buyout funds have remained the most favoured fund type, with 95% of investors stating this fund type as a preference, compared with 94% in 2012. Growth vehicles have risen to become the second most preferred fund type, listed by 90% as a preference, up from 87% last year. There are slightly fewer investors actively targeting venture capital vehicles, now listed as a preference by 86% of the group, compared with 92% a year ago. Distressed debt vehicles have seen the biggest proportionate increase in investor interest over the last 12 months, with 72% listing this fund type as a preference, seven percentage points more than in 2012. Mezzanine vehicles have also seen an increase, with 61% of the top 100 investors now targeting this fund type, in comparison to 57% which were doing so 12 months ago. This is possibly due to the increase in the number of private equity vehicles focusing on private debt and growth opportunities as companies search for alternative sources of credit in the volatile financial markets.

Overall, the change in the composition of the top 100 investors in private equity by capital allocated to the asset class over the last year indicates increasing diversity in both geography and investor type. It is likely that, going forward, this diversification will continue, especially as Asia-based and other emerging market-based investors contribute an increasing amount of capital to the asset class. Through the financial crisis, private equity has managed to remain an attractive option for many investors, despite its illiquid nature.

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