Private equity managers are predicting growth in their industry, driven by growing investor interest and an increase in exits over the next 12 months, according to a new survey from industry data provider Preqin.
Preqin surveyed 187 private equity fund managers about the year ahead, and found that many expect higher investor commitments to the asset class over the coming months. Almost half (47 percent) noted increased investor appetite in Europe, with significant numbers also seeing more interest from investors in North America (45 percent) and Asia (40 percent), Preqin said in the latest edition of its Private Equity Fund Manager Outlook.
Respondents reported more interest from family offices (58 percent) and public pension funds (41 percent) compared to 12 months ago, while 38 percent of surveyed managers stated that private pension funds and sovereign wealth funds were also showing greater interest in the asset class.
“This latest survey shows that private equity fund managers are still seeing growing appetite from investors,” Christopher Elvin, head of private equity products at Preqin, said in a statement. “The portfolio diversification and record returns provided by the industry as of late have continued to attract investors to the asset class.”
Buoyed by this continuing demand from investors, nearly two-thirds of surveyed firms are expecting overall private equity industry assets to expand over the next year, with just 4 percent expecting total assets under management to decrease.
The industry optimism is reflected by a majority of firms, which expect both deal and exit activity to increase over the next 12 months.
Globally, 62 percent of private equity managers plan to put more capital to work over the next 12 months, with just 13 percent expecting to spend less. Meanwhile, 44 percent of fund managers are predicting increased exit activity, compared to just 23 percent who foresee a decline.
According to the survey, valuations remain the biggest concern for fund managers in the present climate, and 46 percent of firms stated that pricing is higher now than it was 12 months ago.
At the same time, competition in the private equity industry shows no sign of easing. The largest proportion of managers (53 percent) have seen competition increase for mid-market buyout transactions, although 11 percent of managers think that competition has diminished when making large buyout deals, according to the survey.