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Europe-Based Pension Funds Investing in Private Equity over the Next 12 Months – November 2013

by Raisah Yusuf

  • 05 Nov 2013
  • PE

Just under a quarter (22%) of Europe-based pension funds (both public and private) tracked by Preqin’s Investor Intelligence product are looking to make new commitments to private equity funds over the next 12 months. The majority of these LPs are located in Western Europe (79%), and a fifth (20%) are based in the Nordic region. The remaining pension funds looking to make commitments over the next 12 months are based in Central and Eastern Europe. 

Of the European pension funds looking to commit to private equity over the next 12 months, over half (54%) will be committing to vehicles investing domestically, while 40% of the investor type will be investing in North America-focused funds. Emerging markets are the third most preferred region for investment (22%). One example of a European pension fund looking to invest in emerging markets is the €15.4bn Finnish State Pension Fund, that recently issued an RFP for an emerging markets fund of funds manager. The Helsinki-based pension fund expects to invest €100mn in managers in Asia, Latin America and possibly Russia, with a hiring decision expected to be made by the end of this year. A fifth of European pension funds looking to commit to private equity over the next 12 months will be committing to Asia Pacific-focused vehicles.

In terms of fund types, the most commonly pursued investments of European pension funds are in traditional buyout vehicles, with 44% of the institutional investors citing a specific investment preference for these funds. Funds of funds is the second-most common fund type for these LPs, with 42% indicating a preference for these vehicles. UK-based pension fund Kingfisher Pension Scheme is planning to make its maiden commitment to private equity through a fund of funds manager. The £2bn pension fund awarded a £100mn multi-alternatives mandate to LGT Capital Partners in June, which includes investment in private equity funds among a variety of alternative asset classes. Venture capital (21%), secondaries (20%) and growth vehicles (17%) are also attractive investments to the investor type over the next 12 months.

Of European pension funds looking to commit to private equity over the next 12 months, just under a quarter (24%) would commit to a pure first-time fund, while 15% would be willing to commit to a fund led by a spin-off management team. Thirty-eight percent of European pension funds looking to invest in private equity over the next 12 months would commit to a fund before it has held an initial close, while 35% would consider doing so. Eighty-five percent of European pension funds looking to commit to private equity over the next 12 months expect to do so immediately.

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