Private Equity in the UK

by Louise Weller

  • 29 May 2012
  • PE

Preqin currently tracks 1,042 investors that have previously committed to funds focusing on opportunities in the UK. In terms of the types of investors interested in the UK, almost one third (31%) are pension funds, followed by fund of funds managers which represent 15%. Foundations and insurance companies each represent 11% of the LPs known to have previously invested in the UK, whilst endowments account for 10%.

Geographically, 47% of the LPs that have previously invested in funds focusing on the UK are based in North America, while 45% are located within Europe. Investors based within the UK itself make up 21% of LPs that have an appetite for the region, and investors based in the Nordic region and Western Europe also represent a significant proportion LPs that have previously invested in the UK.  Investors based within Asia and Rest of World only represent 8%.

Investors based within the UK also represent a significant source of capital within the private equity industry. Preqin currently tracks 330 LPs that are based within the UK, managing an aggregate $12.6tn in total assets. UK-based investors (excluding fund of funds managers) have an average current allocation to private equity of 5.7% of total assets, with an average target allocation of 6%. It appears that in recent years, UK-based investors have an increased appetite for private equity. In 2009, the average allocation to private equity stood at 4.5% of total assets, whilst the average target allocation was 5.8%.

When looking at the types of funds that UK-based investors look to commit to, buyout funds are the most popular, with 53% of such investors having an appetite for this type of fund. This is followed closely by fund of funds vehicles, with 51% of UK investors having an interest in this fund type, allowing investors to hold diverse portfolios of investment and gain access to various geographical regions, as well as niche markets. 31% of UK-based investors have previously invested in, or have a preference for distressed private equity.

Although much attention remains focused on the economies of countries within the euro zone, the UK remains an important location within the private equity asset class.

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