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Investors in Venture Capital Vehicles vs. Investors in Buyout Vehicles – February 2015

by Lisa Parker

  • 12 Feb 2015
  • PE
  • VC

Venture capital and buyout vehicles were the among the first private equity fund types in the industry, with fund managers continuing to raise large numbers of these vehicles to satisfy LP demand. Preqin's Investor Intelligence database currently tracks over 5,600 investors in the private equity asset class, of which over two-thirds have an appetite for buyout or venture capital vehicles. These investors have combined assets under management of $91.9tn.

Fifty-nine percent of LPs have a preference for or have previously invested in venture capital vehicles, while 52% have a preference for or have previously invested in buyout vehicles. As illustrated in the above chart, private sector pension funds make up the largest proportion of investors in buyout funds (15%). This is followed by foundations (13%), public pension funds (11%) and endowment plans (11%). Foundations make up the greatest proportion of investors in venture capital funds, accounting for 13% of investors. This is followed by private sector pension funds and endowment plans (11% each) and public pension funds (9%). 

LPs with an appetite for venture capital vehicles have higher average current and target allocations to private equity than LPs with an appetite for buyout vehicles. Venture capital investors currently allocate an average of 10.5% to the private equity asset class; this is in comparison to 10.1% for buyout investors. The average target allocation for investors in venture capital vehicles is 11.8% of total assets and 11.3% for buyout.

The most recent Preqin investor survey, as featured in the 2015 Preqin Global Private Equity & Venture Capital Report, revealed that 49% of LPs believed small to mid-market buyout vehicles were currently presenting the best opportunities in the current market, with 11% citing large to mega buyout vehicles. In contrast, only 14% of surveyed investors felt that venture capital vehicles were presenting the best opportunities. Additionally, the majority (54%) of surveyed LPs were looking to target small to mid-market buyout vehicles over 2015, ahead of venture capital (26%) and large to mega buyout (12%) vehicles.  

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