Asia to offer best private equity returns, says Coller Capital

Coller Capital finds investors especially bullish on Asia-Pacific buyouts; investors set to increase allocations to private equity in next 12 months.
Coller CapitalÆs 4th Global Private Equity Barometer reports that investor bullishness on private equity is unchanged despite blockbuster fundraising in 2005. Indeed, investors propose to increase allocation to alternative assets in general and specifically to private equity over the next 12 months. Investors are also showing an increased willingness to diversify their holdings over a larger number of funds.

Investor appetite for private equity has been buoyed by the returns yielded by buyout funds - however investors are cognizant that going forward aggressive leverage will reduce returns from buyouts in traditional markets of North America and Europe. Investors expect that Asia-Pacific buyouts will offer the most attractive investment opportunities in the next 12 months. The development marks the first time since the Barometer was launched that European buyouts have not emerged as the most attractive investment opportunity. This also perhaps represents an accurate reflection of how the centre of gravity for the private equity world is moving eastwards. Interestingly, enthusiasm for Asia-Pacific buyouts is shared by investors worldwide with about half the investors surveyed in each region sharing the bullish assessment of Asia-Pacific buyouts.

The other area investors are optimistic on is ôtake privatesö with 75% of investors expecting to witness increased activity. Investors are increasingly willing to invest directly in funds launched by private equity fund managers. A growing category of investors is even willing to directly invest in private companies, either alongside the fund or on their own. Investors plan to sell more assets in the secondary market as part of a more active approach to managing their portfolios. Two thirds expect secondary sales to increase in the next three years.

Amidst all the euphoria is also a word of caution. Investors are becoming more demanding of the funds they invest in and less willing to invest in follow-on funds if they are not satisfied with performance.

Jeremy Coller, chief executive of Coller Capital (which is a leading investor itself in private equity) says: ôWe have only begun to experience the difference private equity will make to the world economy. Through this young asset class, institutional investors are allocating capital to some of our most dynamic companies û and, increasingly, they are doing so independent of their own location and of companiesÆ ownership structures. There will be much more to come û we are still in the opening chapters of the private equity story.ö
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