Foundations Investing in Private Equity - July 2013

by Firakh Patel

  • 10 Jul 2013
  • PE

Foundations continue to be an integral investor type within the private equity universe, standing as the third most prevalent investor type tracked by Preqin’s Investor Intelligence database, accounting for 14% of all investors. Preceded only by private sector pension funds and public pension funds, the 741 foundations currently tracked by Preqin represent aggregate assets under management of $1.1tn.

In terms of geographic preferences, 77% of foundations have shown an appetite for investing in North America-focused funds. Half of foundations have shown a preference for investing in Europe-focused vehicles and 28% have an appetite for investing in emerging markets. Of the foundations that are tracked by Preqin, the majority are based in North America (88%), followed by Europe (10%) and regions outside North America and Europe (2%).

On average, foundations tend to allocate a greater proportion of their total assets to private equity than other types of investors in the asset class. The average target allocation of all investors in the private equity universe (excluding fund of funds managers) is 10.8% of total assets, whereas for foundations it stands at 12.2%. Likewise, the average current allocation to private equity for all LPs is 10.3% of total assets, but stands at 12.1% of total assets for foundations.

Almost 60% of foundations have shown a preference for, or have previously invested in, fund of funds vehicles, compared to 40% of all known investors in the private equity asset class. Other key strategies foundations target include venture capital (51%), buyout (46%) and distressed private equity vehicles (36%).

Foundations continue to contribute a significant amount of capital to the private equity asset class which is likely to continue for the rest of 2013, with a quarter of foundations tracked by Preqin looking to commit further capital to the asset class over the next 12 months.

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