| Private equity to rise among European pension funds |
|
|
| 13/01/2008 | |
|
Funds of funds are increasingly being used by European pension funds to access private equity and hedge fund investments, according to a global survey by Russell Investment Group. The current 4.6% average strategic allocation to private equity among European investors is forecast to rise to 5.5% in the next two years, while allocations to hedge funds and real estate are forecast to rise from 7.4% to 8.4% and from 8.9% to 9.7%, respectively. One in five respondents limits private equity exposure to Europe, while two out of three respondents have little or no exposure to Europe. Separately, the study found that most frequently mentioned strategies under consideration are currency overlay, tactical asset allocation overlay, portable alpha and infrastructure. Comparisons Ninety-five (57%) of the 167 North America respondents indicated that private equity is part of their strategic asset allocation compared to 54% for Europe and 61% for Australia. In North America, public funds continue to comprise the lion's share of private equity commitments and this dominance seems to have increased since the last survey. Private equity commitments of endowments also increased while corporate funds experienced a reduction by more than half. Among the North American respondents, the trend in allocation is different based on the size of the pension plan. Average allocations to private equity continued to trend down in 2007 among small (under $5bn) and mid-sized ($5bn to $10bn) respondents, with a modest increase among the largest, according to Russell. Allocations fell somewhat from 2005 levels to 6.5%, significantly below the forecast made by respondents in the same year when they said allocations would reach 7.6% by 2007. "The fall in the overall mean strategic allocation to private equity from 2005 levels is the result of reductions in allocation to private equity reported in both the public and corporate sector." In Europe, the average strategic allocation to the asset class has grown steadily in the last decade and reached 4.6% in 2007. It is forecast to rise to 5.5% by 2009. Leveraged buyouts continue to represent the majority of European investors' capital commitments, while commitments to mezzanine financing and other types of private equity investment fell from 15% to 11%. The biggest gains are in Australia where the strategic allocation of corporate respondents surged in 2007 to 8.5% from 3.7% in 2005 and is forecast to increase to 10.6% in 2009. Leveraged buyout shares of private equity commitments (41%) among Australian investors increased considerably with most of the investments (47%) being made through fund of funds. This is a noteworthy difference with North America where respondents prefer single fund partnerships (88%) compared to only (43%) in Europe. VB |
|
Articles of the same Topic : Alternatives |
|
© Copyright 2008 bfinance. This document is for your personal non-commercial use. Any further copying, reproduction, distribution is strictly prohibited. To obtain permission please contact This e-mail address is being protected from spam bots, you need JavaScript enabled to view it