The Missing 1,500 PE Investors

by Helen Kenyon

  • 05 May 2011
  • PE

Preqin tracks more than 4,300 investors in private equity funds located around the world. 1,500 of these past investors, however, are not currently considering new investment opportunities or are over-allocated to the asset class. Why are these LPs missing and are they likely to return to the asset class in the future?

A third of the 1,500 missing LPs placed their private equity investments on hold for a period of six months or more, but intend to recommence investments within the next two years. Many of these are investors that halted new investments during the worst of the financial crisis, but are gradually returning to the market as conditions improve.

More than 200 LPs are known to currently be over-allocated to private equity. Typically, these institutions will reduce the pace of their new commitments or will place their investments on hold but will return to the asset class as their allocation levels fall back within acceptable ranges.

Around half of the missing 1,500 LPs have opted to stop investing in private equity funds for the foreseeable future. Although many of these investors only made one or two investments in private equity funds in the past, approximately a quarter had more sizeable portfolios of private equity investments and have opted to cease investing as a result of a change in strategy, perhaps prompted by changes in their liquidity profiles or in the level of acceptable risk in their portfolios. It is possible that some of these institutions may return to the asset class in the future, but it is unlikely they will begin assessing new opportunities for at least another few years.

Over half of the missing 1,500 LPs are therefore set to return to the asset class over the next couple of years, which is good news for fund managers planning to raise new vehicles in 2012 and onwards. Identifying these institutions and getting in touch with them prior to their return to the asset class could help GPs to increase their chances of securing capital from them further down the line, even if the institutions in question are not actively assessing new opportunities at present.

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