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Foundations Investing In Private Equity

by Louise Weller

  • 09 Aug 2011
  • PE

Preqin currently tracks 402 foundations, with total assets under management of more than $468bn, that are known to invest in private equity, or are considering making an initial investment in the asset class. Our data shows that on average, foundations have total assets under management of $1.2bn.

Geographically, 85% of these foundations are located in North America, followed by 13% in Europe and 2% across the rest of the world. Foundations have historically been long-term investors in private equity, and view the asset class as a means of maintaining long-term financial stability. Although North America remains a popular choice for foundations that invest in private equity, with 81% of foundations stating a preference for funds focusing on this region, over a third (34%) of foundations have previously invested within emerging markets.  24% of foundations have previously made a commitment to a fund focusing on opportunities within Brazil, India, China and Russia, whilst 22% have previously invested within Central or Eastern Europe.

In terms of fund preferences, venture funds are the most common fund preference for foundations, with half of such institutions having previously invested in a venture fund, or citing a preference for such funds. Aside from buyout funds, fund of funds vehicles are frequently utilised by foundations in order to gain global exposure to the private equity asset class for relatively small investors, and also to help maintain a diversified portfolio. Other fund types, such as mezzanine or distressed debt funds, which may not be such an obvious choice for many institutional investors, still remain attractive investments for many foundations. Distressed debt funds are a preference for 28% of foundations, with mezzanine funds a preference for 18% of foundations.

Our data shows that a significant number of foundations are active investors in private equity, with a number also currently considering investing the asset class. Despite a large number of foundations being located in North America, many actively invest across the globe in a variety of fund types, holding diverse portfolios.

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