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Small to mid-market buyouts popular amongst investors

by Tom Carr

  • 13 Sep 2011
  • PE

Buyout vehicles have long been a key preference for investors in private equity, attracting a significant proportion of capital invested in the asset class. Preqin’s Investor Intelligence database tracks 1,794 LPs (excluding funds of funds managers) that have either previously invested in, or have expressed a preference for investing in buyout vehicles, more than have expressed a preference for any other private equity fund type. Of the LPs that have a preference for investing in buyout vehicles 53% are based in North America, with 32% based in Europe and the remaining LPs based in Asia and rest of world.

Preqin recently interviewed a sample of 100 global institutional investors in private equity, excluding funds of funds managers, on their attitudes and preferences towards the private equity asset class. Of those we spoke with, almost half (49%) believe the best opportunities in the private equity asset class are focused around small to mid- market buyout funds, with the same proportion of respondents expecting to target this fund type in the next 12 months. This was significantly more than the next most popular fund types, distressed and venture, which 23% and 22% of respondents named, respectively, as fund types they would be targeting in the next 12 months.

In contrast to small to mid-market buyout funds, only 6% of LPs interviewed named large to mega-buyout vehicles as presenting the best opportunities in the current market, with 9% of LPs expecting to target this fund type in the next 12 months, indicating that investor confidence in large to mega-funds is still significantly lower than prior to the financial crisis.

There have been a number of buyout vehicles that have held a final close in the past few months, including Snow Phillips Fund II, a North American-focused buyout vehicle. Investors in this buyout vehicle include the New York State Common Retirement Fund which committed USD 100 million to the fund.

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