Four in 10 limited partners report net annual returns of over 16% across PE portfolios: report

THE proportion of investors reporting net annual returns of over 16 per cent across the lifetime of their private equity (PE) portfolios is reaching record levels, according to a new survey by Coller Capital.

The alternative asset manager on Wednesday (Jun 8) reported that 4 in 10 limited partners (LPs) now have portfolio-lifetime net annual returns of over 16 per cent. Around 52 per cent reported a return of between 11 per cent and 15 per cent in 2022.

Coller Capital noted that this figure has only been exceeded once since its barometer study was first published in 2004. This was during 2007 in the run-up to the global financial crisis (GFC), when 45 per cent of LPs reported the same.

In comparison, only 21 per cent of respondents reported a net annual return of 16 per cent in 2021, while 67 per cent saw a return of between 11 per cent and 15 per cent.

Notably, more than half of LPs saw more than 16 per cent in net returns from their Asia-Pacific venture investments, while nearly 40 per cent achieved more than 16 per cent in returns from buyout investments in the region.

A majority (or 70 per cent) of LPs said their PE portfolios outperformed their public equity holdings since the GFC. Only 14 per cent saw their public equity portfolios outrun their PE portfolios.

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Coller Capital’s report also noted interest in investment themes like cryptocurrencies, the metaverse and ESG (environment, social and governance).

Around 81 per cent of LPs do not see themselves ever making commitments in PE or venture capital (VC) funds that invest using cryptocurrencies. Taking it one step further, around 44 per cent have made a policy decision to exclude cryptocurrency investing.

Meanwhile, about one-fifth of LPs expect to commit to PE or VC funds that invest using cryptocurrencies. Around 14 per cent of LPs surveyed already have commitments, while 5 per cent plan to do so in the next few years.

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For crypto-enabling businesses, however, almost a third (30 per cent) of LPs have commitments to PE/VC funds targeting investment in this area. About 13 per cent expect to make commitments in the new few years.

As for the metaverse, 17 per cent of LPs presently have commitments in PE or VC funds that target investment in the service and goods for this sector. Another 17 per cent plan to make such commitments in the coming years.

When it comes to ESG investing, most investors in Asia-Pacific believe it drives value. Globally, around 65 per cent of LPs believes ESG adds value by excluding high-risk investments and business practices and by introducing proactive, positive changes to portfolio companies.

Coller Capital surveyed 110 investors of private market funds. These investors were based in North America, Europe, and the Asia-Pacific region (including the Middle East). Fieldwork for the barometer was done from Feb 7 to Mar 30.