coller capital's global p.e. barometer, winter 2008
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8/14/2019 Coller Capital's Global P.E. Barometer, Winter 2008
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A UNIQUE PERSPECTIVE ON THE ISSUES AND OPPORTUNITIES
FACING INVESTORS IN PRIVATE EQUITY WORLDWIDE
Global Private Equity BarometerWinter 2008-09
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Coller Capitals GlobalPrivate Equity Barometer
Coller Capitals Global Private Equity Barometer is a unique
snapshot o worldwide trends in private equity a twice-yearly
overview o the plans and opinions o institutional investors
in private equity (Limited Partners, or LPs, as they are known)
based in North America, Europe and Asia-Paciic.
This edition o the Global Private Equity Barometer captured
the views o 107 private equity investors rom all round the
world. The Barometers indings are globally representative o
the LP population by:
Investor location
Type o investing organisation
Total assets under management
Length o experience o private equity investing
Contents
Key topics in this edition o the Barometerinclude:
LPs returns expectations & appetite or PE
The secondaries market
Buyout unds perormance multiples
Pace o GP investment
Attractive areas or GP investment
Asia-Pacifc PE market
Middle East PE market
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Investors appetite or privateequity remains strong
The recent downturn in the global economy and fnancial
markets has not dented investors appetite or private equity
97% plan to maintain or increase their target allocation to
private equity over the next year, which is broadly in line with
their intentions in recent years.
(Figure 1)
LPs plannd changs o hr prva quy allocaon n h
nx 12 monhs
Winter2004-05
Winter2005-06
Winter2006-07
Winter2007-08
Winter2008-09
Increase Stay the same Decrease
Two thirds o LPs to reach orexceed target PE allocation
in 2009
By the end o 2009 two thirds o LPs (66%) are likely to be at,
or above, their target private equity allocations.
GPs planning new unds in 2009 should take note: North
American LPs (28%) are more likely to have exceeded their target
allocation than European LPs (14%) or Asia-Pacifc LPs (19%).
LPs ancpad lvl of Pe commmns compard wh hr
arg Pe allocaons a nd 2009
(Figure 2)
Our commitments will be in excess of our target allocation
Our commitments will be approximately equal to our target allocation
Our commitments will be lower than our target allocation
All LPs North AmericanLPs
Asia-PacificLPs
EuropeanLPs
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Secondaries market will playa variety o roles or LPs
The secondaries market will be a valuable tool or private equity
investors in the months and years ahead. They will use it not
only to boost liquidity, but also to change the shape o private
equity portolios.
Unsurprisingly, two thirds o LPs (64%) cite a requirement
or increased liquidity as a driver o the secondaries market
in the next two years. But almost equal proportions point to
the need to re-ocus resources on the best-perorming GPs
(61%) and to re-balance portolios between dierent types o
private equity (59%).
Nearly hal o LPs (45%) say re-directing resources to other
asset classes or uses will also be important especially to
investors who fnd themselves over-allocated as a result o
alling stock markets.
North American LPs have beenreadiest to reuse re-ups
The proportion o investors that has reused to re-invest with
one or more o their existing GPs varies widely around the
world: 4 out o 5 North American LPs (79%) have done so in
the last year, compared with only hal o Asian LPs (52%).
Man rasons why LPs mgh sll asss n h scondars
mark ovr h nx 2 yars*
LPs ha hav dclnd o r-nvs wh som of hr GPs ovr
h las 12 monhs
* excluds funds-of-funds
(Figure 3)
Reduce volatility ofportfolio returns
Increase liquidity
Re-focus resources onthe best-performing GPs
Re-direct resources toother asset classes/uses
Re-balance portfolio betweentypes of PE (e.g. between
venture and buyouts)
Lock-in returns
Declined some re-investment requests
Re-invested with all GPs
North American LPs European LPs Asia-Pacific LPs
(Figure 4)
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Poor GP perormance and styledrit will prompt the mostre-up reusals
Two thirds o LPs expect to reuse re-up requests in the coming
year. Poor perormance o a GPs most recent und and GP
investment style drit are their biggest concerns.
LPs remain optimistic aboutmedium-term PE returns
43% o investors expect to achieve returns o at least 16%
across their private equity portolios over the next 3-5 years.
Clearly, their estimate takes into account both the difculties
that the downturn spells or their existing private equity
investments and the buying opportunities GPs will have over
the next year or two.
LPs expect less than a1.5x return rom todaysmega-buyout unds
The majority o investors (69%) expect the current crop o
mega-buyout unds to yield a median net return o less than
1.5 times.
(Figure 5)
(Figure 6)
(Figure 7)
Facors lkly o dr r-ups n h nx 12 monhs
LPs xpcng n annual rurns of 16%+ o hr prva quy
porfolos ovr h nx 3-5 yars
LPs mdan n rurns xpcaons for mga-buyou funds
sll n hr nvsmn phas
Style drift at a GP
Staff turnover within a GP
Continuity/succession issues at a GP
Terms & conditions of a GP's fund
GP conflicts of interest
Poor performance of a GP's most recent fund 1
2
3
4
5
6
Changes to an LPs PE strategy
Capital constraints at an LP
Poor reporting/transparency from a GP
Apportionment of carry within a GP's team
7
8
9
10
Winter
2004-05
Winter
2005-06
Winter
2006-07
Winter
2007-08
Winter
2008-09
Less than 16%16% or more
Less than
1.0x
(7%)
1.0-1.49x(62%)
1.5-1.99x
(27%)
2x or
more
(4%)
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Small buyouts to outperormother buyouts
Investors believe that small (lower mid-market) buyout
investments completed since the start o the credit crunch will
outperorm other buyouts. 41% o LPs expect small buyouts to
achieve a median multiple o at least two times compared
with just 26% and 5% o investors expecting such returns rom
mid-market and large buyouts respectively.
Lower mid-market to bemore buoyant or deallowthan other areas
LPs believe large buyout unds [i.e. unds in excess o $3bn] will
fnd it more challenging to fnd good investment opportunities
over the coming year than other und types. 83% o investors
expect lower mid-market buyout unds to call the same amount
or more money in the coming year compared with just 31%
o LPs who eel the same or large buyout unds.
LPs xpcaons for h mdan gross mulpl of buyous
compld snc h sar of h crd crunch
(Figure 8)
1.0-1.49x Less than 1.0x1.5-1.99x2x or more
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Investors plan increasedexposure to Asia-Paciic region
Less than hal o North American LPs (41%) have 6% or more
o their private equity investment targeted at the Asia-Pacifc
region. Within three years this proportion will have risen to
almost 70%.
For European LPs the picture is similar with a third o
investors (32%) having 6% or more o their private equity
investment in Asia-Pacifc now and almost two thirds (61%)
expecting the region to account or 6%+ in three years.
Asia-Pacifc LPs, already the most active investors in their own
region, will continue increasing their exposure. Almost a third
o investors (30%) currently have an Asia-Pacifc exposure o
more than 20%. This will increase signifcantly, to a hal o
Asia-Pacifc LPs, in three years.
Now In 3 yearstime
Now In 3 yearstime
Now In 3 yearstime
20%
LPs prva quy nvsmn n h Asa-Pacfc rgon as a
prcnag of hr ovrall Pe porfolos
(Figure 11)
Buyouts oer best GPinvestment opportunities inthe coming year
Investors believe (small) buyouts will provide the best
opportunities or GP investment in all areas o the world during
the year to come with buyouts in the Asia-Pacifc region being
the most attractive.
th bs aras for GP nvsmn ovr h nx 12 monhs
LP vws
(Figure 10)
European buyouts
North American buyouts
North American venture
Asia-Pacific venture
European venture
Asia-Pacific buyouts 1
2
3
4
5
6
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Weak GPs ind it too easyto raise unds in Asia-Paciic,LPs say
The increasing attractiveness o the Asia-Pacifc region as
a destination or LP investment may be a double-edged
sword. Over three quarters o investors (78%) think the ready
availability o capital is making it too easy or weak GPs to
raise unds in the region.
Asa-Pacfc counrs n whch LPs nvs and plan o nvs n
h nx 3 yars
(Figure 14)
India China Japan Australia Other TaiwanKorea
Currently invest Plan to invest in next 3 years
India and China are LPsmost avoured investmentdestinations
The high-growth markets o India and China oer the best
private equity investment opportunity in the Asia-Pacifc region
according to LPs. These markets are ollowed by the developed
economies o Japan and Australia.
No, its not too easy(22%)
Yes, its too easy(78%)
LPs blvng s oo asy for wak GPs o ras funds n h
Asa-Pacfc rgon
Obstacles acing PE investmentin India, China and Japan
Investors believe increasing competition between GPs and
a scarcity o private equity talent will be signifcant barriers
to private equity investment in India and China in the next
three years. The regulatory and tax environment is seen as a
particular obstacle to investing in China (59% o LPs).
A shortage o established GPs, economic slowdown, and a
weak exit environment are seen as the greatest obstacles to
Japanese private equity.
JapanChinaIndia
Limited access tocapital markets
Scarcity ofPE talent
Limited number ofestablished GPs
Increasingcompetition for deals
Regulatory/tax environment
Too few good managers
for portfolio companies
Economicslowdown
Entrepreneurs reluctantto share ownership
Weak exitenvironment
Obsacls facng Pe nvsmn n inda, Chna and Japan ovr
h nx 3 yars LP vws
(Figure 15)
(Figure 16)
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Signiicant barriers exist
Investors identiy a lack o credible GPs (95% o LPs) and
geopolitical risk (93% o LPs) as the most signifcant obstacles
to the growth o private equity in the Middle East.
Three quarters o investors (74%) claim their own lack o
knowledge o the region is also a major obstacle.
Natural resources tops list oLP target sectors
LPs believe the sectors oering the most attractive investment
opportunities or GPs in the Middle East over the next three
years are natural resource extraction, real estate, and retail and
leisure.
Obsacls o h growh of prva quy nvsmn n h
Mddl eas LP vws
th mos aracv scors for GP nvsmn n h Mddl eas
ovr h nx 3 yars LP vws
(Figure 18)
Significant obstacle Not a significant obstacle
Too few credible GPs
Geopolitical risk
Lack of local talent
LPs lack of knowledge
Lack of quality assets
Limited access tocapital markets
Unfavourable legal/regulatory environment
Limited exit opportunities
Respondents (%)
(Figure 19)
Very attractive Attractive
Respondents (%)
Unattractive
Oil, mining &natural resources
Real estate
Retail & leisure
Healthcare
Technology/biotechnology
Industrial manufacturing
& services
Financial services
LP exposure to Middle East togrow over the next 3 years
The Middle East attracts a tiny raction o LPs private equity
investments just 3% o North American investors and 10% o
Asia-Pacifc investors currently invest in the region.
This is set to change over the next three years, as 48% o Asia-
Pacifc LPs, 32% o North American LPs and 21% o European
investors plan to target some o their private equity investment
specifcally at the region. For most investors, investment in the
Middle East in three years time will still not represent more
than 5% o their total private equity exposure though 1 in 10
Asian LPs plans an exposure o between 6-10%.
Now In 3 yearstime
Now In 3 yearstime
Now In 3 yearstime
North American LPs European LPs Asia-Pacific LPs
6-10%1-5%0%
% of PE portfolio targeted at the Middle East
LPs prva quy nvsmn n h Mddl eas as a
prcnag of hr ovrall Pe porfolos
(Figure 17)
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Coller Capitals Global PrivateEquity Barometer
Respondent breakdown Winter 2008-09
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