Western LPs optimistic for 2013 – Duff & Phelps survey

A majority of 100 Limited Partners in North America and Western Europe believe private equity has rebounded from the global financial crisis and is positioned for strong performance this year, according to advisory and banking firm Duff & Phelps.

The poll, conducted with mergermarket, found nearly half of respondents feel their PE investments have surpassed their expectations and an overwhelming 95% expect to increase the amount apportioned to the asset class.

There is also increased interest in the market for secondary PE commitments (72%), with nearly two-thirds of respondents saying private equity portfolio assets are one of the most attractive opportunities for General Partner (GP) investors.

Alongside this, corporate disposals are also highly rated, with 60% of respondents rating them as highly attractive opportunities.

As part of the survey, attitudes towards Europe were addressed, with nearly all respondents saying the eurozone crisis has been a major influence on their investment decisions. However, 81% believe Western Europe offers substantial distressed opportunities.

Other findings include:

   • 72% expects LP investors to acquire more European PE commitments in the in the secondary market

   • 63% think the eurozone crisis will escalate

   • 78% of North American LPs think Western Europe is too risky to invest in

The survey also suggests that the dynamic between GPs and LPs has evolved as the market becomes busier and bank lending remains sluggish.

“Given the uncertainty and turbulence that has characterised much of the past few years, it is refreshing to see a decidedly more upbeat and confident tone from the LPs’ forward-looking insights,” said Mathias Schumacher, managing director of Duff & Phelps in London.

“In addition, the emerging trend of sponsor-to-sponsor buyouts, especially within the European private equity community are perceived as propping up an otherwise slower deal market – and this has interesting economic implications.”

Communication and transparency are seen as critical to any deals. Nearly all LPs (98%) are communicating more frequently with their GPs, and 63% of LPs cite timeliness of reporting as the most common problem with valuation information.

Three out of four LPs asked GPs for greater transparency in the last 24 months. When choosing a fund manager, 70% of LPs said that transparency was the most important factor (ahead of strategy and performance).


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