Kohl Capital: "Global Major LPs Will Reduce Private Equity Fund Commitments"

Survey on Private Equity Market Conducted Targeting 112 LPs Worldwide

[Asia Economy Reporter Kwangho Lee] A survey has revealed that global institutional investors are gradually reducing their commitments to private equity funds (PEF).

UK-based private equity firm Coller Capital recently announced on the 13th that it published the 'Global Private Equity Barometer Report' containing these survey results. This report was based on a survey of 112 institutional investors (LPs) worldwide.

Two-thirds of the responding institutional investors diagnosed that the so-called 'denominator effect' is occurring in the market. Institutions allocate assets by investment type according to a certain ratio, but as the total asset value including stocks and bonds decreases, their capacity to make additional commitments to private equity funds is diminishing.

Furthermore, more than a quarter of respondents viewed the recently intensifying liquidity shortage as a factor causing a decrease in private equity fund commitment amounts. The survey also found that institutional investors prefer commitments to private credit funds, which invest in loan receivables, over general private equity funds that invest in corporate equity.

Among institutional investors planning to revise their investment portfolios in the future, two-thirds expressed a desire to change their investment sectors. The report anticipated that institutional investors are likely to utilize the secondary market (a market for trading already invested assets).

Jeremy Coller, Chief Investment Officer (CIO) of Coller Capital, said, “This Global Private Equity Barometer Report visually demonstrates how turmoil in the public markets and economic environment is impacting private equity investment portfolios,” adding, “Currently, LP investors are trying to utilize the secondary market when adjusting their portfolios.”

The report also pointed out that institutional investors consider the current high inflation as the biggest risk factor for private equity investments over the next 2 to 3 years. However, it explained that private equity investment returns are expected to exceed 16% annually next year, marking the highest level since the report was first published in 2012.

This content was produced with the assistance of AI translation services.