Financial Poise

Preqin – Majority of Private Equity Investors Surveyed Say Expectations Met

PE FundSixty-four percent of private equity participants say their investments met their expectations in 2015, while 30 percent say they exceeded those expectations,  according to a new survey from alternative investment research firm Preqin.

Of those surveyed, just 6 percent of investors hold a negative view of the industry, according to Preqin.

Additionally, 54 percent say they will make new contributions in 2016, while 10 percent say they will stay on the sidelines.

Management fees remain a a cause for concern, with 64% of investors citing fees as a problem versus 60% the previous year. Ninety one percent of investors have previously decided not to invest in a fund due to its proposed terms, with a quarter of respondents frequently choosing not to invest as a result of unattractive terms.

Thus, even though 63% of investors surveyed saw a change in management fees over the past six months, there is still more work to be done to meet investor expectations, Preqin says.

The survey indicates 75 percent of investors agree that their interests are aligned with those of fund managers, about the same as a year ago. Interestingly, 12 of respondents say they plan to invest mostly or entirely with a new manager and 22 percent planning to allocate entirely to re-ups with existing managers.

The majority of private equity investors (70 percent) cited pricing and valuations as the biggest challenge in operating an effective private equity program over 2016. Performance is the second biggest challenge, cited by 40% of investors.

Meanwhile, 15 percent of investors believe that transparency will be the biggest challenge in 2016, and 47% of investors that disagree that their interests are aligned with fund managers’ cite it as an area in need of improvement.

The survey was conducted with 226 institutional investors in private equity.

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About Michele Schechter

Michele has been a director with Financial Poise since 2012.

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