INSTITUTIONAL INVESTOR SENTIMENT SURVEy - PEI Media

EXECUTIVE
SUMMARY
Combining the responses of 100 prominent private equity institutional investors with
propriety information sourced from our databases, the Data Division of Private Equity
International completed extensive research to present the Institutional Investor Sentiment
Survey. Our analysis found that:
• Over half of surveyed respondents stated that they had no plans to increase their
allocation to private equity beyond their current levels, reinforcing the belief among
fund managers that fundraising has become increasingly challenging. (page 8)
• Almost three quarters of LPs indicated that, at present, they have no plans to increase
their number of fund commitments. Of these, almost half are looking to reduce the
number of relationships they have. (page 9)
• 90 percent of LPs believe that management fees should be reduced following the
conclusion of a fund’s investment period and 64 percent of LP respondents believe
that they should receive a fee break as an early investor in a fund. (page 11 and 12)
• Over 35 percent of institutional investors believe that fund managers should charge a
1.5 percent management fee in order for them to consider making an investment in
a private equity fund. Almost half of survey respondents cited high management fees
as sufficient reason to not commit to a fund manager. (page 13)
• 69 percent of LPs believe that the eight percent optimum hurdle rate is just right
when considering funds in developed markets, although for emerging market-focused
funds, it is too low. (page 15)
• 69 percent of respondents insist that senior members of investment firms should
communicate with LPs during the fundraising process, whilst 63 percent want GPs
to provide more detail on their fund’s structure and investment focus. (page 25)
• Only 14 percent of investors would happily work with a placement agent, with 40
percent of investors saying that their decision would depend on the placement agent
themselves and 46 percent preferring to deal directly with a GP, ignoring the placement
agent. (page 31)
• The majority of respondents (85 percent) have had a request from at least one of their
fund managers for a fund extension in the past year, with 42 percent of LPs having
been approached by more than 10 percent of their fund managers for an extension
on the original fund terms. (page 33)
• Almost 80 percent of survey respondents expressed concerns about zombie funds in
their investment portfolios while over 70 percent of LPs are concerned about the effects
of the sovereign debt crisis on their private equity investments in 2012. (page 34)
institutional
investor
sentiment
survey
foreword
• executive summary
allocation
fees
lp – gp relationship
future investments
and concerns
appendix: global
fundraising
page 3
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