How Has the General Election Impacted UK LP Appetite for Private Equity over the Past Year?

by Mark Burden

  • 13 May 2015
  • PE

During the build-up to the UK general election, a period of imminent change for the UK Government, businesses were facing an uncertain future in upcoming times. The private equity industry is no exception and while the next government was much undecided, it is possible that firms held back from making investments until a more stable environment arose. Promised shake-ups to the tax system, new rules affecting those with non-domiciled status and changes to bank lending could have all swayed investors to hold off committing capital during the run-up to the election. This blog examines the current appetite for private equity of UK-based investors, using Preqin’s Investor Intelligence online service.

Preqin currently tracks a total of 859 investors based in the UK, with 396 of these currently active within the private equity asset class. Of these active investors, 16% are planning on committing to new private equity funds during the next 12 months, as shown in the chart below. This is slightly higher than the corresponding proportion of all investors globally, but only by a single percentage point. The chart below shows how the UK’s appetite for private equity this year compares to other geographies.

It is interesting to note that UK-based LPs, proportionally, will be more active than their North America-based counterparts over the next 12 months, though considerably less active than the rest of Europe. According to Preqin’s Fund Searches and Mandates module, 13% of North America-based LPs have indicated that they are looking to commit to a new private equity vehicle in the next 12 months, compared to 22% of investors in Europe based outside the UK.

Looking at the data from this time last year, we see that 16% of UK-based investors in private equity were looking to make new investments in the following 12-month period. As this proportion has remained constant, with no variation between the May 2014 and May 2015 figures, it would appear that the overall sentiment of investors in the UK has not been significantly affected by the run-up to the election, and private equity remains a very attractive investment option for many UK-based LPs. Among these investors, buyout funds are the most sought-after strategy, with 60% of UK-based investors indicating a preference for these funds in the year to come. Venture capital funds (39%) and growth funds (27%) follow as the next most targeted strategies.

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