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<p>Concerns over high valuations have not been enough to dim investors&#8217; preference for private equity as an asset class, suggests a recent survey by research firm Preqin.</p></article>

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<p>Concerns over high valuations have not been enough to dim investors&#8217; preference for private equity as an asset class, suggests a recent survey by research firm Preqin.</p>
<p>Around 95 per cent of the investors surveyed by the firm felt that the performance of their portfolio either met or exceeded their expectations over the last 12 months, while 92 per cent of limited partners (LPs) said they are looking to deploy the same capital, if not more, in 2018 as they did in 2017.</p>
<p>&#8220;With distributions continuing to outstrip capital calls, investors will need to re-invest significant amounts of capital back into the asset class in order to meet target allocations,&#8221; the report noted.</p>
<p>A massive 80 per cent of respondents said they plan to make their next commitment in the first quarter of 2018.</p>
<h4><strong>Timeframe for Investors’ Next Intended Commitment to a Private Equity Fund </strong></h4>
<p><img loading="lazy" decoding="async" class="alignnone size-full wp-image-94036" src="https://media.dealstreetasia.com/uploads/2018/03/investor-commitment.png?resize=535,368" alt="" srcset="https://media.dealstreetasia.com/uploads/2018/03/investor-commitment.png?w=535 535w, https://media.dealstreetasia.com/uploads/2018/03/investor-commitment.png?resize=300,206 300w, https://media.dealstreetasia.com/uploads/2018/03/investor-commitment.png?resize=260,180 260w" sizes="(max-width: 535px) 100vw, 535px" data-recalc-dims="1" /></p>
<p>While a majority of LPs still hold a positive view of the asset class, high valuations, greater fees and exit concerns have had some impact on sentiment. According to the Preqin report, 63 per cent of investors reported a positive view of private equity as an asset class, a substantial decrease from 84 per cent in December 2016, and the lowest proportion in three years.</p>
<h4><strong> Investors’ General Perception of the Private Equity Industry, 2015 &#8211; 2017</strong></h4>
<p><img loading="lazy" decoding="async" class="alignnone size-full wp-image-94035" src="https://media.dealstreetasia.com/uploads/2018/03/investor-perception.png?resize=603,403" alt="" srcset="https://media.dealstreetasia.com/uploads/2018/03/investor-perception.png?w=603 603w, https://media.dealstreetasia.com/uploads/2018/03/investor-perception.png?resize=300,200 300w" sizes="(max-width: 603px) 100vw, 603px" data-recalc-dims="1" /></p>
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<p>&nbsp;</p>
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<p>Small to mid-market buyout funds remain the top pick for investors as almost half of the LPs surveyed believe these to present the best opportunities. However, this is a significantly smaller proportion than previous years. Meanwhile, growth fund investments appear to have gained increased favour among LPs in 2017 (28 per cent) compared to 2016 (18 per cent).</p>
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<p>As for geographies, Asia climbed up the preference ladder even as North America continues to remain the investor favourite. About 69 per cent of respondents in 2017 said the region provided the best opportunities, compared with 61 per cent in 2016. Just over half of LPs see Europe offering the best opportunities, while significantly more investors view Asia favourably at 32 per cent in 2017 as compared to  20 per cent a year ago.</p>
<h4><strong>Regions that Investors View as Presenting the Best Opportunities, 2016 vs. 2017</strong></h4>
<p><img loading="lazy" decoding="async" class="alignnone size-full wp-image-94037" src="https://media.dealstreetasia.com/uploads/2018/03/best-regions.png?resize=530,364" alt="" srcset="https://media.dealstreetasia.com/uploads/2018/03/best-regions.png?w=530 530w, https://media.dealstreetasia.com/uploads/2018/03/best-regions.png?resize=300,206 300w, https://media.dealstreetasia.com/uploads/2018/03/best-regions.png?resize=260,180 260w" sizes="(max-width: 530px) 100vw, 530px" data-recalc-dims="1" /></p>
<p>Among emerging markets, China unsurprisingly tops the investor list. In fact, it saw its popularity soar further in 2017, unlike rival India which witnessed a decline in investor perception of its attractiveness compared to 2015.</p>
<h4><strong>Countries and Regions within Emerging Markets that Investors View as Presenting the Best Opportunities, 2015 &#8211; 2017 </strong></h4>
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<p><img loading="lazy" decoding="async" class="alignnone size-full wp-image-94038" src="https://media.dealstreetasia.com/uploads/2018/03/emerging-mkts.png?resize=533,364" alt="" srcset="https://media.dealstreetasia.com/uploads/2018/03/emerging-mkts.png?w=533 533w, https://media.dealstreetasia.com/uploads/2018/03/emerging-mkts.png?resize=300,205 300w" sizes="(max-width: 533px) 100vw, 533px" data-recalc-dims="1" /></p>
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<h3><span style="font-size: 18px; font-weight: bold; font-family: Georgia, 'Times New Roman', 'Bitstream Charter', Times, serif;">VENTURE CAPITAL</span></h3>
<p>Unlike private equity, the general perception about venture capital among investors has improved over the last one year, especially among investors that adopt a longer-term view.</p>
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<p>The Preqin report showed that high returns and diversification potential have increasingly attracted institutional investors and capital to venture capital. However, the growth in competition has also led to almost 40 per cent of the investors saying they find it increasingly difficult to identify attractive opportunities.</p>
<p>Other concerns for investors in 2018 include portfolio company valuations, the current exit environment and fees.</p>
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<p>This, however, is not deterring investors from maintaining or even increasing their allocations towards venture capital over the long term. Around 65 per cent of investors surveyed were looking to form at least one new manager relationship in the next 12 months, providing optimism for first-time managers planning to enter this competitive space.</p>
<p>Other highlights include:</p>
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<li>More than half of the investors with active venture capital mandates plan to spread their investments across five or more vehicles in the next 12 months.</li>
<li>Around 55 per cent intend to commit $1-99 million in fresh capital to venture capital funds in the next 12 months, and a further 36 percent are looking to commit $100-499 million.</li>
<li>While just 9 percent of investors are targeting investments of more than $500 million, the aggregate capital committed by this small group could exceed the other 91 per cent of investors’ aggregate commitments in the year ahead.</li>
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<h4><strong>Investors’ General Perception of the Venture Capital Industry, June vs. December 2017</strong></h4>
<p><img loading="lazy" decoding="async" class="alignnone size-full wp-image-94040" src="https://media.dealstreetasia.com/uploads/2018/03/vc-perception.png?resize=535,363" alt="" srcset="https://media.dealstreetasia.com/uploads/2018/03/vc-perception.png?w=535 535w, https://media.dealstreetasia.com/uploads/2018/03/vc-perception.png?resize=300,204 300w" sizes="(max-width: 535px) 100vw, 535px" data-recalc-dims="1" /></p>
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<p><strong>Also Read:</strong></p>
<p><span style="color: #ff0000;"><strong><a style="color: #ff0000;" href="https://www.dealstreetasia.com/stories/private-equity-leveraged-buyouts-93274/" target="_blank" rel="noopener">Private equity firms see opportunities amid pricey leveraged buyouts</a></strong></span></p>
<p><span style="color: #ff0000;"><strong><a style="color: #ff0000;" href="https://www.dealstreetasia.com/stories/deal-pricing-to-remain-biggest-challenge-for-asian-pes-in-2018-report-92479/" target="_blank" rel="noopener">Deal pricing to remain biggest challenge for Asian PEs in 2018: Grant Thornton report</a></strong></span></p>
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Global investors are still bullish on private equity (PE) as an asset class with a majority of limited partners gearing up to put in more capital this year.

Despite challenges, PE still most preferred alternative investment asset class: Preqin

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Despite challenges, PE still most preferred alternative investment asset class: Preqin

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