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LP allocations towards private equity have remained steady in
recent years, averaging 21 percent in August 2013 compared with 17 percent for
the same month in 2016.
Almost two-thirds of LPs allocate less than 10 percent of
their investment portfolio to private equity, with a mean of 4 percent.
However, the 10 percent of investors that devote 75 percent to 100 percent of
their portfolio to the asset class ensure the overall average is kept
Sovereign wealth funds have demonstrated one of the biggest
increases in allocation to private equity over the past two years, notably the
Australia Future Fund, which has increased its allocation to more than 10
percent since 2013. SWFs have overtaken private pension funds to become the
second largest group of investors behind public pensions in the asset class.
As LPs experience falling returns from their bond holdings,
private equity investments are becoming a useful way to improve income – the
Government Pension Investment Fund of Japan, which lost $52 billion in fiscal
year 2015, has mandated State Street Trust and Banking to help it move into
Much like the SWFs, LPs are likely to increase their allocations
to private equity, regulation permitting. August 2017’s figure may show a
higher percentage devoted to the strategy than previous years.
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