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Wealth Managers Investing in Private Equity – August 2012

by Claire McNeil

  • 28 Aug 2012
  • PE

Wealth managers tend to utilize alternative asset investments to diversify client portfolios, as well as to achieve returns greater than those typically offered by more traditional investments. Data from Preqin’s database reveals that private equity is an alternative investment utilized widely by the wealth management industry.

In terms of service coverage, of the wealth managers allocating capital to the private equity asset class, 82% provide discretionary services and 83% provide non-discretionary services. This statistic is unsuprising, since the majority of wealth managers provide both types of service, with few providing one or the other.

Geographically, North America has the highest proportion of wealth managers investing in private equity, with 57% of wealth managers based in this region actively investing in the asset class. Private equity is slightly less popular among European wealth managers, with just under a third allocating capital to private equity and Asia and Rest of World makes up the smallest proportion, with only 10% of wealth managers based in this region actively making commitments to the asset class.

The statistics are similar for client location – of the wealth managers investing in private equity, 57% have North America-based clients, and slightly fewer serve clients based in Europe and Asia and Rest of World (38% and 32% respectively).

The larger proportion of North America-based wealth managers investing in the asset class may be due to the fact that 71% of wealth managers viewed this region as yielding private equity investment opportunities. However, in a recent survey conducted by Preqin, 63% of wealth managers perceived Asia to be an attractive area for private equity investment. Therefore, attractive private equity investments in North America may not be the sole cause of large proportions of wealth managers investing in this region investing in the asset class; expertise, regulation and client risk profile and preference may also be at play.

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