Private equity investors are planning to commit more to the asset class over the next 18 months despite most having seen weak returns from their investments, according to a new study.
Nearly two-thirds of investors plan to accelerate new commitments to private equity funds over the remainder of 2010 and 2011, private equity firm Coller Capital said in its Global Private Equity Barometer, released on Monday.
The plans to increase investments come in spite of falling returns. Some 51 percent of investors have made lifetime returns of less than 11 percent from private equity and over 20 percent have made less than 5 percent, the study found.
"There is nothing that suggests investors are not very keen on the industry but for individual firms it opens some tough and challenging discussions ahead," said Coller chief investment officer Jeremy Coller.
As the downturn intensified, the better private equity managers have risen to the top, while those with poor performing companies and without the operational skills to turn them around have struggled.
One-third of investors said most firms do not have the requisite operational skills, while the remainder said the majority of firms have the talents, the study found.
Two in five North American private equity investors expect to reduce the number of firms they invest in over the next two years as they focus on the top performers. About a fifth of European and Asia-Pacific investors plan to cut the number of funds in which they invest.