The study shows that demand for private equity investments remains very high: 35 percent of institutional investors and 88 percent of family offices and foundations report having invested more than 10 percent of their portfolios in this asset class. Both investor types have gradually increased their allocations in recent years – as a key measure to enhance portfolio returns and as a result of the asset class's relative outperformance.
The three most important long-term strategic preferences of investors include secondaries, mid-market buyouts, and growth capital. Almost 60 percent of institutional investors now dedicate more than 5 percent of their private equity allocation to this strategy. Family offices and foundations have also increased their allocations, with 39 percent of them now allocating more than 15 percent of their private equity portfolio to secondaries, according to the study.
Marco Wulff, Managing Partner at MCP, comments:
"Private equity remains very attractive to investors, and secondaries play an important role for many of them. This is due to the advantages secondaries offer investors, such as their attractive risk-return profile. Furthermore, the strategy has demonstrated innovation and resilience in the current market environment."
Investors' biggest concerns
Elevated valuation levels, on the other hand, are the predominant topic causing investors sleepless nights. For a full 72 percent of MCP respondents, the biggest concern regarding market activity over the next 12 to 24 months is general partners buying into companies at excessively high EBITDA multiples. Concerns about a slowing economic recovery follow in second place at 15 percent. Political and regulatory uncertainty takes third place at 10 percent.
Christian Diller, Managing Partner at MCP, adds:
"Private equity's governance model has performed very well during the pandemic, resulting in significant distributions and exit activity. While high valuations and the current rise in inflation rates are a concern for investors, private equity is expected to continue to outperform public markets thanks to the significant growth and operational improvements in underlying portfolio companies that GPs can bring to bear."
About the study
The 2021 Investor Survey is the 9th edition of Montana Capital Partners' Annual Investor Survey. It is based on two parts: an online survey of over 60 of the industry's leading family offices and institutional investors, according to MCP, conducted in August and September 2021. This was supplemented by in-depth interviews with a subset of these investors.
