AAA Investors increase investment in private companies

Investors increase investment in private companies

Investors in leveraged buyout and venture capital funds are preparing to increase the number of private companies they directly buy over the next two to three years.

About a quarter of the respondents to secondaries investor Coller Capital’s Global Private Equity Barometer said they already invested in private companies but 41% said they would expand their direct investments over the next three years.

A large majority of 110 limited partners (LPs) surveyed said governments should avoid setting up or investing in VC funds directly but instead should concentrate on providing other initiatives, such as tax breaks.

The Coller Barometer also said the proportion of LPs that had made lifetime portfolio returns of less than 11% from private equity had increased to 51% from 29% last year and 22% in 2008.

Despite this drop in returns, the proportion of LPs planning to increase their percentage of assets allocated to private equity in the next year is greater than those planning to reduce it (20% versus 13%).

Jeremy Coller, chief investment officer at Coller Capital, said: "Private equity investment is a demonstrably skill-based activity – for LPs and GPs [general partners, the private equity fund managers] alike – and the credit crunch and recession have been a useful, if painful, learning experience. Limited partners, for their part, will have learned many invaluable lessons from the downturn, not just about which GPs have the requisite skills, but also how and where those skills can best be deployed."

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