Private Equity Investors Have High Return Demands

December 21, 2010 ( – Demands on private equity portfolios are now higher than ever before relative to public markets, according to a new survey by Preqin, an alternative investments research firm.

A Preqin news release about its survey of more than 100 private equity investors said 63% of investors expect to receive returns of more than 4% over public markets; in comparison, 17% of investors interviewed in December 2007 shared these expectations.

These findings come as investors prepare to ramp up activity in private equity during 2011 to take advantage of opportunities in the market, Preqin said.

The Preqin study also found that investors in pursuit of higher returns are becoming increasingly receptive to forging new fund manager relationships. Some 71% of investors are considering investing with managers they have no prior relationship with in 2011 compared to 59% the year before.

Other survey highlights include:

  • Fundraising activity was low in 2010 but 2011 will see the return of many investors to the market. Some 62% of investors interviewed expect to make new fund commitments in 2011 and a further 30% have yet to finalize their plans for the year, suggesting the proportion active in 2011 could be much higher.
  • Investors are making more capital available for private equity investments in 2011 to take advantage of attractive opportunities: 54% expect to commit more capital to funds in 2011 than in 2010. Some 90% of investors interviewed intend to increase or maintain their private equity allocations over the next three to five years.
  • Key areas of interest for investors in 2011 include small to mid-market buyout funds and distressed private equity, which are seen as attractive by 55% and 20% of investors, respectively. Some 70% currently invest in or are considering investing in emerging markets.

The study report is at