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While investment returns have started to slowly recover from the financial crisis, private equity investors are now looking towards new opportunities for profits in individual deals and other channels. With this current trend, money is being transferred away from established funds that investors have previously backed and into first time funds, possibly signifying the direction investors are taking towards experimentation in the private equity market.
Coller Capital, a secondary market investor, recently released their data showing the behavior of private equity investors in the next two years and how more than 80% of them will not be participating in the funds of managers that they have previously backed twice. A spokesperson from the financial firm credits this course of action by investors as a sign of confidence in private equities as an asset class that gives them the freedom to dictate how and who they will support with their money.
Coller Capital adds that first time funds are set to benefit as investors are straying away from long held investments. They claim that in the next two years, two thirds of US based participants will choose first time funds for direct investments in developed markets.
This statistic comes despite US investors benefitting the most from investment returns finally creeping back up years after the crisis by giving just about 25% of investors an annual net return of at least 16%. While this represents a number twice as a large as it was the previous year, it is still a far cry from the 45% in 2007 prior to the crisis.
Additionally, the company’s survey identified the difference between European and US investors in their concerns when transacting deals. Two thirds of investors in the US fear that either poor quality deals are resulting from an oversupply of leverage or that high quality deals are receiving too much debt with only one fifth of their European counterparts feeling the same.
