Private equity investing has lost its ‘alternative’ tag and gone mainstream, according to a new report on the sector released today by Swiss-based fund-of-fund provider Adveq.
The study found that almost half of the institutions surveyed in Europe and Australia invest in private equity or are planning to – a proportion higher than expected. “The popularity of private equity as perceived by the institutional investor community has grown and will most likely continue to do so,” the Adveq report says. “Particularly when stock market performance is poor or unpredictable, investors increasingly look for new ways of generating attractive returns or diversifying their portfolios.” However, while all the European institutions surveyed planned to increase their exposure to private equity, Australian fund managers have slightly lowered their allocation to the sector. The survey found Australian institutions would commit an average 4 per cent of their total assets to private equity, down from the current 4.5 per cent. “The decreasing level in Australia is the result of some investors getting out of private equity,” Adveq says in the study. “Historically, almost all of those had only direct private equity commitments and are now seeking to reduce the percentage of assets under management going to private equity.” Despite this, Australian institutions were the most bullish about potential returns from private equity with an expectation of generating 16.5 per cent versus European managers which predicted returns of between 10 and 13 per cent. Bruno Raschle, Adveq founder and managing director, said the study also revealed a substantial change in the nature of private equity investing as compared to five years ago. Raschle said that in 2000 almost two thirds of private equity investments were in venture capital with the remainder going to buyouts. “Now that’s completely changed,” he said. “Of the $US 230 billion raised worldwide for private equity investments last year only 10-15 per cent of that is going to venture capital.” He said the resurgence of the buyout sector is being driven by a restructuring wave affecting the world’s biggest companies which would leave a large proportion of the Fortune500 firms vulnerable to buyout funds.
Since taking over the top job at the $44 billion Funds SA more than a year ago, chief executive John Piteo has ushered in an investment function overhaul and wrapped up an important stage of the fund’s five-year data transformation program. It pledges to recentre around investment performance and more efficient processes, as the “missing piece” has been found in incoming CIO Con Michalakis.
Darcy SongJanuary 10, 2025
