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Private Equity Investor Appetite for Growth Funds – July 2013

by Philippe Alteirac

  • 02 Jul 2013
  • PE

Although buyout and venture capital funds are typically the most sought after fund types by institutional investors in private equity funds (53% of investors on Preqin's Investor Intelligence service have an appetite for buyout funds and 59% have a preference for venture capital funds), growth funds continue to remain an attractive investment prospect for LPs looking to hold diverse investment portfolios.

Preqin's Investor Intelligence service currently tracks 5,130 investors in private equity funds, with over two-fifths (41%) having either previously invested in a growth fund or stated a preference for such vehicles. Growth funds are a particularly common investment choice for North America-based LPs, which account for 51% of LPs with a preference for this fund type. Europe-based investors account for 27% and the remaining 22% of LPs that have shown an interest for growth vehicles are from Asia and other regions outside of North America and Europe.

Of these LPs with an appetite for growth funds, 12% are fund of funds managers, with foundations accounting for 11% of investors. Endowments, private sector pension funds and public pension funds each represent 10% of investors interested in this fund type, while 9% of investors are insurance companies.

Among the LPs actively investing in growth funds is Illinois State Board of Investment, which recently committed $20mn to Valor Equity Partners III, a growth fund targeting $350mn in total commitments. Another investor known to have recently shown an interest in growth funds is International Finance Corporation, which made a $20mn commitment to BVCF III, a growth fund targeting investments in life sciences and healthcare companies in China.

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