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Europe-Based Pension Funds Investing in Private Equity Over the Coming Year – December 2014

by Katie Edwards

  • 09 Dec 2014
  • PE

Preqin’s Investor Intelligence online service currently tracks 405 Europe-based pension funds (both public and private) that are actively investing in private equity funds. Seventeen percent of these LPs are looking to make new commitments to private equity funds over the next 12 months. Sixty-seven percent of Europe-based LPs looking to make new commitments over the coming year are located in Western Europe, the remaining 33% are based in the Nordic region. 

Over half (61%) of the Europe-based pension funds looking to commit to private equity over the next 12 months will be committing to vehicles operating within Europe. Forty-six percent of the investor type will be looking to invest in North America-focused vehicles, 15% will be targeting Asia-Pacific-focused funds, and an additional six percent of Europe-based pension funds will be looking to commit to emerging market-focused funds. An example of a Europe-based pension fund looking to invest in Europe, North America and Asia-Pacific is Keva, a €40bn Finnish public pension fund expecting to commit up to €700mn across six to 10 new private equity funds over the coming year. 

Similar to this time last year, the most popular type of private equity vehicle among Europe-based pension funds are buyout funds, with 60% of the institutional investors stating a preference for these vehicles. The second most sought after vehicle for these LPs are funds of funds, with 30% of pension funds naming funds of funds as a target vehicle for the next 12 months. CARAC is a France-based public pension fund that will be targeting both buyout and fund of funds vehicles. The €10bn pension fund plans to commit to four or five new buyout and fund of funds vehicles, working with existing managers in its portfolio as well as forming new GP relationships. Other investment strategies that are attractive to Europe-based pension funds are venture capital (16% have a stated interest in this strategy), secondaries (15%) and distressed debt vehicles (12%). 

The average amount of capital Europe-based pension funds are looking to commit to new private equity funds over the next 12 months is €131mn. Forty-six percent of these LPs would commit to a fund before it has held a first close, while 22% would consider doing so. Forty-two percent of Europe-based pension funds would, or would consider, committing to a first-time fund, while a further 15% would be willing to commit to a fund led by a spin-off management team.  

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