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Government Agencies Investing in Private Equity – October 2013

by Lauren Mason

  • 02 Oct 2013
  • PE

Government agencies are traditionally one of the smaller investors in private equity by number, only accounting for 3% of all LPs monitored by Preqin’s Investor Intelligence, but their investments and involvement within the asset class are significant to the market and should not be overlooked. Preqin currently tracks 147 government agencies, which collectively have total combined assets under management of more than $1.9tn, and represent 1.7% of all active investors’ combined assets under management.

Geographically, 29% of these government agencies are located in Europe, 22% located in North America and 20% located in Greater China, with the remaining 29% spread across other regions across Asia and Rest of World. Although North America remains a common choice for government agencies investing in private equity, with 26% of government agencies stating a preference for funds focusing on this region, over a third (34%) of government agencies are interested in investing within Europe. Sixty-eight percent of government agencies have a preference for funds focusing on opportunities within Asia and Rest of World regions, and 27% have expressed an interest in emerging markets.

In terms of fund preferences, venture capital vehicles are the most common preference for government agencies, with 78% of the institutions citing a preference for, or having previously committed to such funds. Growth vehicles are also an apparent popular choice for government agencies, with 57% of government agencies showing a preference for or having existing exposure to this fund type. An example of a recent growth vehicle commitment from a government agency is that of Overseas Private Investment Corporation (OPIC) to Lombard Asia IV. OPIC’s $100mn investment was a significant contribution to the final close of $350mn held by Lombard Investments in July 2013. Other fund preferences of government agencies include buyout vehicles (34%), fund of funds vehicles (22%) and mezzanine vehicles (21%).

Preqin’s data shows that a significant number of government agencies are active investors in private equity, or currently considering investing in the asset class. With the wide range of fund preferences and geographic targets spanning the globe, it is clear that in spite of the small proportion government agencies constitute out of all LP groups, they still play an important role in the asset class.

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