Study: LPs plan to increase PE exposure

While asset allocation to private equity remains relatively low at 11%, half of those surveyed in a recent LPEQ and Scorpio Partners study plan to increase their holdings in the asset class in the next year.

Post credit-crisis demand for high returns has prompted investors to increase allocations to alternative assets, according to a recent LPEQ and Scorpio Partnership study.

LPEQ, a group of European listed private equity funds and firms, found that although private equity funds account for only 11 percent of respondents’ allocated assets, 50 percent of the chief executive officers and senior investment professionals surveyed expect to increase their private equity allocations in the next year.

More than 20 wealth management professionals representing private banks, asset managers, universal banks and family offices participated in the survey. The sample group held around $5.7 trillion in assets under management.

Because most of those surveyed are either at or below their targeted private equity allocations, LPEQ chairman Ian Armitage said that he expects wealth managers will continue to increase their investments in private equity as the post credit-crisis market improves.

“I don’t think that wealth management have had the over allocation [to private equity] that many larger investors had,” he said. “Wealth managers under exposed pre credit crunch.”

The respondents also expected private equity to yield greater returns relative to risk than commodities, real estate and hedge funds over the next five years. Of those who had invested in private equity, 55 percent preferred listed private equity and 41 percent preferred private equity funds.

Allocations to alternative investments have increased from seven percent in 2009 to 17 percent currently, according to the report. Last May, LPEQ released a survey indicating that 57 percent of family offices planned to invest in private equity this year.

These findings are consistent with another report, published last month by professional services firm Rothstein Kass, which found that 70 percent of single family office executive directors said they planned to invest in private equity in 2011.