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Survey: LPs bullish on 2008 vintage

The majority of limited partners in private equity expect a 15-percent-or-better net IRR from private equity funds launched in the current environment, according to a report produced by PEI Media and trade association ILPA.

More than 80 percent of limited partners expect the 2008 vintage year to deliver a net IRR of 15 percent or higher, according to a survey.

The figures are part of the newly released PEI-ILPA Global Limited Partner Survey 2008, which was produced jointly by trade association the Institutional Limited Partners Association (ILPA) and PEI Media, the publisher of PrivateEquityOnline and Private Equity International magazine.

The survey garnered responses from the majority of ILPA members as well as from other LPs around the world. The ILPA membership includes the largest backers of private equity in the world.

PEI-ILPA survey results show that 43 percent of LPs expect the 2008 vintage to return between 15 percent and 19 percent. A further 35 percent expect returns of between 20 percent and 24 percent. Five percent expect 2008 returns of 25 percent or more.

In commentary preceding the LP return-expectation data in the report, Katharina Lichtner, a managing director at advisory firm Capital Dynamics, wrote: “The PEI-ILPA results show that long-term or near-term return expectations are not the strongest driver for allocation decisions, because the data shows little correlation between return expectations and the decision to increase, maintain or decrease allocation to private equity.”

Lichtner, added: “[W]ith respect to the vintage year 2008 we believe it is a good time to commit to funds as long as allocations to experienced managers are available.”

The PEI-ILPA survey studied queried hundreds of major LPs about their current and future allocations to private equity, as well as their return expectations from the asset class. The survey also asked LPs about their policies with regard to co-investments, secondaries, first-time funds, funds of funds, geographic and strategy allocations.

The ILPA is a not-for-profit association serving limited partner investors in the global private equity industry.