Who are the most significant institutional investors in the private equity asset class?
When we first set out to answer this question last year, we focused exclusively on a single metric: the amount of capital each LP had committed to private equity funds in the preceding 12 months. Our rationale was that this would answer the fundamental question for any GP: in the current fundraising environment: who is most likely to write me a cheque?
But the more we thought about our inaugural LP50 list, and the more we discussed it with people in the marketplace, the more we became convinced that its second iteration should be bigger and more ambitious. Why? Two reasons.
The first is that fund investments are clearly now just one element of the way big investors commit to private equity. In particular, it seemed wrong to exclude separate accounts and co-investments, which are becoming an increasingly important part of the mix for large institutions – and direct deals too, since they generally form part of the private equity allocation.
We’ve also expanded the timeframe, to cover all private equity investment over the last five years. Again, you can guess why. LPs often think in terms of fundraising cycles; within that period, actual commitments can be lumpy. If all an LP’s favourite managers go out at the same time, it’s likely that year will be busy and the next a lot quieter. So a longer timeframe gives a better sense of an LP’s pace of commitments across the cycle (for which five years is a decent proxy).
Our Research & Analytics team, which tracks the activity of fund investors and managers globally, compiled the ranking. We began by asking investors around the globe for the total amount of capital they had committed to private equity* between 1 March 2009 and 28 February 2014; we then ‘trusted but verified’ the numbers submitted. For those LPs who release this information publicly, we calculated the total ourselves and sought to verify these numbers with the LP directly.
If we couldn’t confirm the specific total, or didn’t feel confident about making an accurate prediction, we excluded that institution from the final ranking. So the LP50 probably excludes some investors who would have made the list given perfect information.
Size isn’t everything, of course: the figures herein don’t tell you which LP has the biggest allocation, the broadest reach, the deepest pockets or the most inventive strategy. But it does provide a definitive guide to who’s been writing the most cheques lately.