European Private Sector Pension Funds Investing In Private Equity

by Louise Weller

  • 21 Jun 2011
  • PE

Preqin’s Investor Intelligence database currently tracks 933 LPs (excluding fund of funds managers) located in Europe that are actively investing in private equity, with a further 51 investors considering setting a maiden allocation to the asset class. The largest proportion of investors that are actively investing in private equity are private sector pension funds; representing  20 % of active private equity investors in Europe, followed by public sector pension funds at 15% and with banks and investment banks representing 12% of such investors.


The 189 private sector pension funds located in Europe that are known to be investing in the private equity asset class, currently have total assets equating to more than EUR 808 billion, with an average allocation to private equity of 3.7% of total assets. When broken down geographically, the majority (85%) are located in West Europe, with 47% of those investors located in the UK.  A further 14% are located in Nordic regions and just over 1% are located in Central and Eastern Europe.


There are currently no Iceland-based private sector pension funds that are actively looking to make new commitments to private equity funds over the next 12 months. This is owing to the strict currency controls imposed by the Icelandic government, following the financial crisis in the country, which prevent institutions in the country investing abroad; making it difficult for these LPs to invest in the private equity asset class at present.

Buyout funds are commonly cited as an investment preference, with 47% of investors having previously invested in buyout funds or have a preference for such vehicles.  In addition to this, fund of funds vehicles are an important method of portfolio diversification for these LPs, some of whom may not have the experience or substantial amounts of capital to invest in direct funds. Funds of funds are a common preference amongst European private sector pension funds; 52% have previously invested in, or stated a preference for fund of funds vehicles. Less common fund types include mezzanine funds and distressed debt funds, with 14.3% and 8.5% respectively of European private sector pension funds citing a preference for such funds, or having previously made a commitment to these types of funds.

Overall, private sector pension funds make up a significant proportion of active private equity investors in Europe. Despite financial difficulties and economic instability in the region, private equity remains an important asset class for many of the regions’ private sector pension funds.

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