Foundations Investing in Private Equity

by Madeleine Stretton

  • 01 Aug 2012
  • PE

Foundations are increasingly becoming a more prominent investor in the private equity asset class. Currently, Preqin tracks 695 foundations actively investing in private equity, a 73% increase from the 402 investors Preqin was tracking in August 2011. These foundations have aggregate assets under management of $585bn, and average total assets under management of $866mn.

Geographically, 89% of foundations currently tracked by Preqin are based in North America, followed by 10% in Europe and 1% in Asia and Rest of World. In terms of geographic scope, North America remains a popular choice for foundations to invest in with 73% expressing a preference for North America-focused funds in comparison to the 46% who have a preference for Europe-focused vehicles. A sizeable proportion of foundations (29%) are known to have previously invested in a private equity fund targeting emerging markets. However, a slightly smaller proportion (22%) maintain a preference for investing in emerging markets.

In terms of fund type preferences, venture capital and buyout vehicles continue to be favourites among foundations. Fifty-four percent of foundations are known to have a preference for venture capital funds, and 45% with a preference for buyout funds. Distressed private equity opportunities, including mezzanine and special situation, are a preference for 33% of foundations.

Despite the widespread uncertainty in this current financial climate, foundations continue to be an integral investor in the private equity space. Despite illiquidity concerns as a result of the financial climate, foundations continue to allocate significant portions of their portfolios to private equity, with an average target allocation to the asset class of 11.8%.

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