The East-North Central and East-South Central regions of the US are not as prominent in the private equity universe in comparison to the east coast and west coast regions of the US; however, these regions contain a significant number of LPs with capital available to invest in the asset class. The regions account for a sizable 13.8% of total US-based LPs, in comparison to the well-publicized Pacific region, which represents 15.5% of all US-based investors. The East-North Central and East-South Central regions are home to a number of large private equity investors, including Michigan Department of Treasury.
Preqin’s Investor Intelligence currently tracks 512 East-North Central- and East-South Central-based LPs, with aggregate assets under management of over $3tn. Foundations are the most dominant investor type in the regions, accounting for just under a quarter (24%) of all investors. Just under a fifth (18%) of investors are endowment plans, private sector pension funds represent another 18% and public pension funds, 10%.
Investors in the East-North Central and East-South Central regions (excluding fund of funds managers) are typically below their target allocation to private equity, which stands at an average of 11% of total assets, with a mean current allocation of 9.3%. With LPs from these regions having additional capital available to invest, it is interesting to see which fund types they have a preference for. Fifty-seven percent of investors either have an appetite for, or have previously invested in, venture capital funds, comparable to the 58% of all US-based investors which target this fund type. Other key strategies that investors in the two regions target include fund of funds (54%), buyout (53%) and distressed debt vehicles (34%).
Geographically, 84% of East-North Central- and East-South Central-based LPs have a preference for investing in North America; however, many LPs from these regions are also open to allocating capital to various international markets. Forty-three percent of LPs are open to investing in Europe-focused vehicles and over a quarter (26%) will consider funds targeting emerging markets.
It is evident that East-North Central- and East-South Central-based LPs are likely to continue to be an important source of capital for fund managers on the road, as these investors continue to maintain significant allocations to private equity, along with diversified investment portfolios.