Diversity Across Private Equity: Quarterly Review of Private Equity Investors

During the third quarter, investor interest in private equity funds remained strong, and that interest originated from a wide array of different investors. While funds of private equity funds are statistically the forerunner in the search for private equity funds, BHA’s data suggest that this quarter’s interest came from an even broader source of investors.

Wealth advisors, government pension plans, family offices, and insurance companies all showed considerable interest in speaking with private equity fund managers. During third quarter investor interviews, analysts found that of those interested in private equity funds, more than 18 percent were wealth advisors, 13 percent were government pension funds, and 15 percent were family offices and insurance companies. This wide range of investors that showed interest should be encouraging for an asset class that is still recovering from a difficult 2008.

Obviously, funds of private equity funds showed the most interest in single-manager private equity funds. This category of investors accounted for 26 percent of the total private equity interest during the quarter. Funds of private equity funds accounted for nearly a quarter of the interest during the second quarter as well. This consistency is further evidence that investors are moving back into the private equity space.

One reason for this shift is that a broad range of investors are contemplating returning to the private equity asset class as a whole, and still consider it a vital part of their investment portfolios.

Another reason for this diversified interest is that investors from across the globe are, once again, beginning to express interest in capitalizing on opportunities that have emerged in the wake of the financial crisis. Nearly 50 percent of the private equity investors that BHA interviewed indicated that they were currently looking to speak with new venture capital managers that they were previously not already working with. Venture capital funds, especially those focused on early stage investments, are often associated with rapid growth opportunities.

Whether pursuing a cautious or opportunistic approach, the strong yet diverse investor interest in private equity funds suggests investors are positioning themselves for a possible market recovery that could lead to above market returns.