INSTITUTIONAL INVESTOR SENTIMENT SURVEy - PEI Media

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Focus on… Sovereign Wealth Funds Distribution of Sovereign Wealth Funds by Region No. per region 12 10 8 6 4 2 institutional investor sentiment survey foreword 0 Asia- Pacific CEE Latin America MEA North America Western Europe executive summary allocation Source: Private Equity International Despite uncertainty in global markets, Sovereign Wealth Funds (SWFs) have continued to accumulate assets and increase in size, in part through shrewd investments in funds and other investment opportunities. SWFs are also key players in the private equity industry, a number of who have allocated billions of dollars to private equity funds. Examples include the Korea Investment Corporation who has invested $2 billion in the asset class over the past four years and China Investment Corporation who, following much activity in the past few years, has managed to increase their private equity allocation to 21 percent of total assets. In the Middle East, the Abu Dhabi Investment Authority, with over $600 billion in assets under management is one of the largest private equity investors in the world. Buyout funds are the most popular choice for SWFs investing in private equity, with 49 percent of all commitments in the asset class utilising this fund strategy. This is followed by venture capital, which represents 28 percent of commitments. Distressed and mezzanine funds are less popular, representing just four percent and three percent respectively. Although some SWFs invest primarily within their own region, with the aim of rejuvenating their local industries, some are looking towards other regions for investment, especially to chase higher returns available in those regions. North America remains the most popular investment target for SWFs, with 28 percent of allocations to funds targeting this region. Global funds account for 28 percent of fund commitments whilst emerging regions such as Latin America and Central & Eastern Europe remain the least popular investment targets, with a total of just two percent of commitments going to funds targeting those regions, collectively. fees lp – gp relationship future investments and concerns appendix: global fundraising page 19 www.privateequityconnect.com
SWFs prefer to target sectors which provide steady long-term returns institutional investor sentiment survey foreword executive summary allocation fees lp – gp relationship future investments and concerns appendix: global fundraising page 20 Asia is of particular interest for a number of SWFs, especially those in the Middle East where, in recent years, there has been an increase in allocation to the region, and in particular China. At present, SWF commitments to funds targeting Asia-Pacific account for 13 percent of all fund commitments, falling short of the 16 percent which is currently allocated to funds targeting Western Europe. Key sectors which are of interest to SWFs include healthcare, TMT, clean-tech, biotech and energy. It is clear that SWFs are keen to target sectors which will provide steady, long term returns rather than sectors which may yield higher returns but with a greater associated risk. Due to the long term outlook of SWFs, their investments are less likely to chase after the highest returns possible, rather focusing on bringing long term profit to the fund. The emergence of new SWFs in the asset class is a key area of interest for GPs in 2012. Whilst SWFs are one of the most active institution types in the industry, there is still a lot of untapped capital being held by more cautious funds that have not yet entered the asset class. One notable example is the Norwegian Government Pension Fund Global, the second largest SWF in the world with over $500 billion in assets. The Fund has, to date, invested in a number of real estate assets, however, it has not yet entered the PE asset class. There are high expectations that they will do so in the near future and with the sizeable assets they manage, even a small allocation to the asset class would provide a huge boost for GPs currently raising funds. In addition, a number of governments, especially those in emerging markets, are considering launching their own SWFs, which will bring more capital to the asset class. www.privateequityconnect.com
Page 1 and 2: Institutional Investor Sentiment Su
Page 3 and 4: institutional investor sentiment su
Page 5 and 6: LP Respondents Breakdown Where is y
Page 7 and 8: Allocation institutional investor s
Page 9 and 10: Over the long-term, private equity
Page 11 and 12: Co-investments provide LPs with gre
Page 13 and 14: Fee breaks should be negotiated dep
Page 15 and 16: Fees should be calculated in connec
Page 17 and 18: LPs are requesting a “Europeansty
Page 19: GP fund commitments should be a mea
Page 25 and 26: A vast majority of LPs conduct due
Page 27 and 28: There is room for improvement with
Page 29 and 30: Focus on… Endowments Distribution
Page 31 and 32: Strategy Appetite institutional inv
Page 35 and 36: The prevalence of zombie funds has
Page 37 and 38: Private equity is coming under incr
Page 39 and 40: Fundraising by Strategy 150 institu
Page 41: Published in July 2012 by PEI Secon

INSTITUTIONAL INVESTOR SENTIMENT SURVEy - PEI Media

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