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Make-Up of US Mountain-Based Private Equity Investors - February 2014

by Alexander Nikas

  • 12 Feb 2014
  • PE

The Mountain States is a sub region of the western United States, encompassing Arizona, New Mexico, Colorado, Nevada, Utah, Idaho, Montana and Wyoming.  Private equity in this area may not be as prolific as other states such as New York or California for example, but the investor community based in the Mountain States should not be overlooked by any means. 

Preqin’s Investor Intelligence online service tracks 125 Mountain-based investors that are either currently active in investing in private equity funds or considering doing so. Collectively, these LPs have $418bn of assets under management.  Excluding fund of funds managers, investors based in the Mountain region are on average below their target allocations to private equity of 12.3% of total assets, with an average allocation of 11.1% of total assets to the asset class. This indicates that these investors are likely to make new commitments to private equity in the future, as they will want to work towards their target allocations and are likely to have capital available for new fund commitments in the year ahead.

The state of Colorado makes up the majority of LPs based in the Mountain states that are either investing or considering investing in the private equity asset class, accounting for 45% of investors in the region. Colorado Public Employees’ Retirement Association is the largest investor in the state, with $3.3bn allocated to the asset class. The state with the second highest number of investors in the area is Arizona, comprising 14% of the Mountain region’s institutional investors. New Mexico takes third place, making up 13% of investors based in the Mountain region. One significant investor in New Mexico is New Mexico State Investment Council. The $17.5bn sovereign wealth fund, which currently allocates 9% of its total assets to private equity, anticipates increasing its private equity commitment pace, and is planning to commit $500mn to private equity funds over the next 12 months, and $750mn in total over the next 18 months.

Foundations are the most common among investors in the Mountain region, accounting for nearly 33% of all institutional investors. Endowment plans make up the second largest group of investors at nearly 14% of all LPs in the region. This is followed by public pension funds, which account for 12% of all investors in the Mountain region. This is a slightly different trend to the general private equity industry, particularly in the whole of the US, where public and private sector pension funds are the most prominent investor type.

Our direct conversations with Mountain-based investors reveal that these LPs have a clear preference for venture capital funds. In fact, 61% of investors in the region have previously invested or have a preference for this fund type. Funds of funds are the second most attractive fund type to these investors, with 55% of the LPs in the Mountain region investing in or considering these types of vehicles. Buyout funds are also widely sought after by investors in the Mountain region, with nearly 50% of institutional investors showing interest for these funds. 

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