A recent survey conducted by global financial services giant Citi has confirmed a large and increasing appetite for allocations to private equity. Of the 50 pension fund chief investment officers canvassed, 75 percent said they will increase their allocation to the asset class over the next several years, meaning an additional $400 billion in capital commitments available for general partners just from this set of respondents (which, according to the survey, manage some $1 trillion of capital in total).
The notion of an incoming tidal wave of capital is nothing new to the private equity industry. Many prior surveys have discovered existing investors keen to maintain or increase their exposures, with countless others expressing an eager willingness to come to the party. Nonetheless, general partners on the fundraising trail will take comfort from this confirmation that buy-side demand is raging. After all, current market conditions are not at their most helpful – particularly for LBO specialists. Turn to our cover story starting on page 55 to read about today's key fundraising dynamics.
Of course, it doesn't take sophistication simply to target an entire asset class – and history tells us that when the smart money heads in a particular direction, you can bet there's a sizeable chunk of dumb money trailing in its wake. In this issue of PEI, we think we're going where the smart money goes with our profiles of highly specialised funds Oaktree Capital (see Privately Speaking on page 46), Court Square Capital Partners (page 66) and Virgin Green, Richard Branson's first foray into institutional private equity (page 76).
Staying with the “smart” and “dumb” theme, Philip Borel ponders the recent change to the UK's capital gains tax regime in his In Europe column on page 10. Surely, there were smart options available for the Treasury to address certain anomalies in the tax system while leaving incentives to entrepreneurial activity undiminished. It didn't take them, which didn't seem smart at all.
Enjoy the issue,
By Andy ThomsonAndy.firstname.lastname@example.org