PE managers optimistic that deal and exit activity will expand in H2 2016 and beyond

BY Fraser Tennant

Private equity (PE) fund managers are predicting an increase in growth across the industry over the next 12 months, including an uptick in investor interest and exit activity, according to a new survey released this week by Preqin. 

The survey, a snapshot of the views of 187 PE fund managers by Preqin, found that two-thirds of those surveyed expect to see investors commit significantly more to the asset class over the next year.

Conversely, only 4 percent of survey respondents expect total assets under management to decrease during this time.

Additional survey finding include: (i) 47 percent of fund managers reported an increased appetite from investors in Europe, with significant interest also observed in North America (45 percent) and Asia (40 percent); (ii) respondents reported an increased appetite from family offices (58 percent) and public pension funds (41 percent) compared to 12 months ago, while there has also been increased interest shown by private pension funds and sovereign wealth funds; and (iii) valuations remain the biggest concern for PE fund managers in the present climate, with 48 percent believing that the biggest challenge facing the industry is deal pricing.  

“This latest survey shows that private equity fund managers are still seeing growing appetite from investors,” said Christopher Elvin, head of private equity products at Preqin. “The portfolio diversification and record returns provided by the industry as of late have continued to attract investors to the asset class. Although the fundraising market remains ever-more competitive, recent high fundraising levels indicate that capital is continuing to flow into the market.”

In terms of the investment by region analysis, the survey reveals that a higher proportion of PE fund managers based outside of North America and Europe are planning to put more capital to work in the coming year - with 43 percent indicating an intention to deploy significantly more capital and 35 percent planning to marginally increase their investments.

Mr Elvin concluded: “Given the positive fundraising environment and an expected uptick in exit activity, fund managers are predicting industry assets under management will continue to grow over the next 12 months. Although perennial concerns over pricing and deal valuations remain prominent, managers are confident of putting more capital to work over the next 12 months as they attempt to find well-priced assets.”

Report: Private Equity Spotlight - August 2016

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