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LPs Continue to Have an Appetite for Large to Mega Buyout Funds - March 2013

by Joanna Nye

  • 26 Mar 2013
  • PE

A study carried out by Preqin at the end of 2012 found there to be a growth in investor appetite for large to mega buyout funds over the course of the year, with 23% of LPs looking to target the fund type in 2013. This is a significantly higher proportion than the number of LPs demonstrating an appetite for large to mega buyout funds at the end of 2011, when 16% of LPs planned to target such vehicles in 2012.

The projected increase in investor appetite for large to mega buyout funds has been reflected by a number of LPs having made commitments to the fund type in Q1 2013. Examples include a $15mn commitment by District of Columbia Retirement Board to Affinity Asia Pacific Fund IV (targeting $3.5bn in total commitments); two $100mn commitments made by Pennsylvania Public School Employees’ Retirement System to Bain Capital Fund XI (targeting $6bn in total commitments) and New Mountain Partners IV (targeting $3bn in total commitments); a $200mn commitment by New Jersey State Investment Council to Silver Lake Partners IV (targeting $9bn in total commitments); and a $250mn commitment by Washington State Investment Board to KKR North American XI Fund (targeting $10bn in total commitments).

Preqin’s Investor Intelligence database currently tracks 4,956 investors in private equity funds, with almost a quarter (22%) of LPs known to have previously made commitments to large or mega buyout funds. Over half of the investors (53%) tracked by Investor Intelligence have expressed an appetite for investing in buyout funds, and of these, 56% are investors based in North America, 28% are Europe-based investors, and the remaining 16% are LPs based in Asia and Rest of World.

It is evident that investor appetite for large to mega buyout funds has grown over the last 12 months, and is likely to continue to do so throughout 2013 following the significant proportion of LPs that plan to target the fund type over the year, which is reassuring news for fund managers looking to raise LP capital for these vehicles going forward.

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