Although there have been a number of high risers in this year’s Global Investor 100, the net asset values of these firms’ private equity portfolios may well struggle to stay elevated in the wake of economic and geopolitical uncertainty.

Twenty firms rose up the Global Investor 100 list by at least 10 places, or were new entrants, this year, with public and private pension funds and foundations and endowments making up a sizeable chunk of those movers. Nine firms moved down 10 positions or more.

Of these high risers, Temasek Holdings led the pack. The investment firm sits in fourth position this year, with a $57.31 billion allocation to private equity marking 20 percent of its AUM. The University of Notre Dame, meanwhile, has the most sizeable allocation to private equity in the highest risers list, with 45 percent, or $10.3 billion, invested in the asset class. It is followed by the University of Michigan’s 42 percent allocation to private equity, which came in at a total of $7.58 billion.

Massachusetts Institute of Technology, too, saw a leap in its private equity allocation, moving it up 25 places to 44th. Its private equity allocation sits at $11.66 billion, making up 34 percent of its AUM.

Sink or swim

These changes came within a strained operating environment: LPs have had to contend with the dual effects of both the numerator and denominator effects on the back of private equity’s strong performance over recent years, especially when compared with the volatile public markets.

Private equity returned “so much capital” in 2021, and the NAVs of private equity firms’ and investors’ portfolios “has gone up so much that private equity is looking very large in and of itself in investors’ portfolios”, Sunaina Sinha Haldea, global head of private capital advisory at Raymond James, tells Private Equity International. She adds that this is especially the case with tech exposure.

The dual effects at play have created a challenge for LPs, with some now finding themselves overallocated to private equity. “It’s the positive challenge of strong performance… which is, yes, they can ride it, they can run it,” says Richard Hope, managing director and head of EMEA on Hamilton Lane’s global investment team.

As a consequence, those GPs out in the market raising are facing an uphill battle. There is a tight squeeze for commitments as large numbers of managers return to market following the coronavirus pause and subsequent significant exit activity after markets rebounded.

“Nobody has seen a market in fundraising like 2022,” Sinha Haldea says. On top of the numerator and denominator effects, “there is just too much product. Most investors are saying that they’re seeing 1.7x to 2x the regular re-ups they would see”, she adds.

“The human resource at the LP is finite. The LPs are not hiring 20 extra people. The same two or three people now have all of this re-up work in addition to looking at new managers.”