There have been a few glimmers of good news in private equity lately (middle market deals, banking deals etc.)but the silver linings are a long way from swallowing the clouds. According to the folks at Coller Capital, a firm that operates in the secondary market for private equity stakes, investors are gloomy about returns and regulation and some are pulling back from the sector.
According to the summer 2009 edition of Coller’s Private Equity Global Barometer, a bi-annual survey of 120 private equity investors around the world, one fifth of respondents plan to reduce their allocation to private equity this year. (Coller says that compares with no more than 6 percent in previous surveys.) Additionally, Coller found that 84 percent had declined to re-invest with one or more of the private equity firms they had previously used. A third of respondents planned to cut the number of private equity firms they invest with. (Notwithstanding CalPERs announcement last week of intentions to increase its PE allocation.) About ten percent of investors are expected to default on commitments they’ve already made to private equity funds.
Not surprisingly more than three-quarters of the investors Coller surveyed thought their end-of-year private equity statements would be uglier for 2009 than for 2008.
If all that’s not bearish enough for you, 55% of private equity investors expected likely tax changes and further regulation of the sector to hurt private equity returns in North America in the coming year (48% expected a negative impact from those things in Europe and 17% expected lower returns as a result of regulation in Asia.)