Study: LPs expect strong net returns from Asia

LPs forecast net returns of 11%-plus from PE buyouts, a Coller survey found.

The majority (75 percent) of limited partners expect 11 percent or more annual net returns from Asia-Pacific buyouts over the next 3-5 years, according to a survey report from Coller Capital.

By comparison, 90 percent of LPs anticipated 11 percent-plus net returns from North American buyouts and 85 percent from European buyouts.

With venture capital investments, however, fewer LPs had strong expectations. In Asia Pacific, less than half of LPs (48 percent) said they expected 11 percent or more net returns. In Europe, the figure was 33 percent and in North America, 65 percent. 

The survey, which polled 113 investors in private equity funds globally, provided a snapshot of current LP sentiment. It also found that roughly half of all institutional investors worldwide expect to increase the size of their private equity teams in the next 12-18 months. 

Half of sovereign wealth funds, 47 percent of insurance companies and 44 percent of asset managers said they planned increases. 

About 25 percent of public pension fund respondents said they plan to do the same. However, endowments/foundations, corporate pension funds and family office/private trusts all said that they do not plan to change the size of their private equity teams.

The report also found that 44 percent of LPs believe increased economic volatility in the post-financial crisis years has made private equity a more attractive asset class, compared to 12 percent who find it less attractive.

Jeremy Coller, CIO of Coller Capital, said in a statement that LPs are focusing more on private equity because the returns are higher than most other asset classes. “In a low-return world, 86 percent of LPs [globally] are forecasting annual net returns of 11 percent-plus from their private equity portfolios, and a quarter are expecting net returns of 16 percent plus. Where else can you get that level of net return with such consistency?”