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One in Five LBO Investors to Cut European Holdings, Survey Finds

One in five private-equity investors intends to reduce its holdings in European funds because of the sovereign-debt crisis, according to an industry survey.

Those investors concerned about Europe come from all regions of the world, according to a survey by Coller Capital Ltd., a London-based firm that purchases stakes in funds from investors seeking to sell. Still, about 69 percent of so-called limited partners said they are unlikely to change their allocation to the region, while 11 percent intend to increase their holdings, Coller found.

“Limited partners invest for the long term and there has to have stability for them to do so,” said Stephen Ziff, a partner at Coller. “They need to feel confident that Europe will come to grips with its crisis. But overall, investors have the feeling that 2012 will be a good vintage year, a sentiment strongest among U.S. LPs who have lived through more cycles.”

Investors, known as limited partners, are shrinking pledges to new private-equity funds, partly because they haven’t received enough money back from previous pools to match commitments during the boom years. Private-equity managers, which are seeking $711 billion in commitments globally, raised 46 percent less in the third quarter than in the previous three months as the European debt crisis deepened, according to London-based researcher Preqin Ltd.

A “typical” limited partner intends to turn down about a quarter of requests to commit with a fund manager it already has invested with, Coller said. Even if they decide to “re-up,” the majority will reduce commitments in the next 18 months, according to the survey.

About 57 percent of limited partners say the need to refinance the “wall” of leveraged-buyout debt maturing from 2013 to 2015 is a major risk to the private-equity industry, the study found.

The survey of 107 limited partners, including pension funds and sovereign-wealth funds, was conducted in August and September.

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