US private equity tops investor choice – survey

The Commonfund Forum survey also showed LPs predict weakening consumer confidence will end the current bull run within the next year.

US private equity emerged as the top choice for private capital opportunities among institutional investors, a recent survey from the Commonfund Forum shows.

Some 40 percent of respondents see the greatest opportunity in US private equity this year, up from 27 percent last year. Almost 28 percent think smaller buyouts offer the best investment opportunity.

Last year, threats of trade war and protectionism and uncertainty about US markets led to softer investor sentiment on US private equity and greater interest in emerging markets; almost half believed emerging markets presented the greatest private capital opportunity.

This year, 31 percent of respondents selected emerging markets as the greatest private capital opportunity.

Eleven percent of investors consider secondaries as the best opportunity. Only 9 percent selected venture capital, down from 16 percent last year.

The survey included responses from 200 foundations, endowments and public pension investors at the 21st annual Commonfund Forum held in March. Institutional investors came from North America, Europe and Asia, representing $1.3 trillion in assets.

Some 46 percent of respondents expect the current bull market to come to an end within the next year, primarily because of weakening consumer confidence (34 percent), followed by trade wars (18 percent), higher interest rates (17 percent) and the growing US deficit (12 percent).

As with last year, 58 percent expect the S&P 500 to underperform against the 20-year average of 4.4 percent.

Almost half the survey respondents were cautiously optimistic about meeting their long-term target returns of the consumer price index – the benchmark for inflation – plus 5 percent over the next 10 years.