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US West North Central and West South Central-Based Investors in Private Equity – November 2012

by Firakh Patel

  • 27 Nov 2012
  • PE

The West North Central and West South Central regions in the US may be less well-publicised sources of capital for the private equity industry compared to the east and west coast, however these regions contain a significant number of LPs with capital available to invest in the asset class. While containing fewer investors than the widely known Pacific region, which represents 15.4% of total investors in the US, the West North Central and West South Central regions still provide a sizeable 14.2% of total US-based LPs. It is also home to some of the world’s largest private equity investors such as the Teacher Retirement System of Texas.

Preqin’s Investor Intelligence currently tracks 339 West North Central and West South Central-based LPs, with aggregate assets under management of $2.5tn. Foundations represent the largest proportion of investors in these regions, accounting for over a quarter (26%) of all LPs. A further 19% of investors are endowments, followed by public pension funds (17%) and private pension funds (13%) as the most dominant investor type in the regions.

Investors in the West North Central and West South Central (excluding fund of funds managers) are typically below their target allocation to private equity, which stands at an average of 10% of total assets, with a mean current allocation of 9.4%. With LPs from the regions having spare capital available to invest, it is interesting to see which fund types they have a preference for. Fifty-five percent of investors either have a preference for, or have previously invested in, buyout funds, comparable to the 56% of all US-based investors which target this fund type. Other key strategies investors in the regions target include venture capital funds (55%), funds of funds (52%) and distressed private equity (38%). It is worth noting that 31% of West North Central and West South Central-based LPs are either open to, or have previously invested in, the energy and utility sector, which represents a significant component in the region’s economy due to the plentiful reserves of oil and natural gas.

Geographically, it is perhaps unsurprising that 83% of West North Central and West 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 international markets. Forty-six percent of LPs are open to investing in Europe-focused vehicles and over a third (34%) will consider funds targeting Asia.

LP’s based in the West North Central and West South Central look likely to continue to be an important source of capital for fund managers on the road. Investors in these regions have significant allocations to private equity and importantly are, on average, under allocated to the asset class.

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