Make-up of Investors Currently Targeting First-Time Private Equity Funds – January 2013

by Victoria Pitman

  • 15 Jan 2013
  • PE

Preqin's Investor Intelligence database currently tracks 1,000 investors that have expressed a preference for investing in first-time private equity funds. These investors have combined total assets under management of over $30tn, with nearly $1.3tn allocated to private equity. Of these LPs, 299 will not invest in pure first-time funds and will only consider vehicles managed by a spin-off team.

Fifty-three percent of active investors in first-time funds are based in North America, with 29% based in Europe and a further 10% based in Asia. When looking at the breakdown of investors in first-time funds by type, private equity fund of funds managers are the most prevalent, with 18% of first-time fund investors falling into this category. This may be due to the specialised nature of these investors, as they may be more confident in their ability to accurately choose first-time fund managers who will go on to become successful, and therefore take a more inclusive approach to fund commitments than other investors would opt for. Public pension funds comprise 12% of investors in first-time funds, with endowment plans and foundations each making up a further 10%.

As well as investors that actively target first-time funds, a further 345 investors would consider committing capital to a first-time fund if they were presented with an attractive opportunity. These investors have, on average, a smaller proportion of their total assets allocated to private equity, with an average of 9.9% of total assets allocated (excluding fund of funds managers), as opposed to the 14.1% average current allocation for investors that actively invest in first-time funds.

It is crucial that investors continue to view first-time funds as attractive opportunities in order to fortify the pool of fund managers from which investors have to choose. Despite the uncertain fundraising climate experienced by these managers, first-time fund managers with attractive fund proposals can rely on a substantial pool of investors willing to consider committing capital.

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