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40 per cent of UK institutional investors plan to increase allocations to private equity

UK institutional investors remain committed to private equity despite falling return expectations, according to new research from AltAssets for the British Venture Capital Association (BVCA).

Some 40 per cent of a representative sample of UK institutional investors said they expected to increase their allocation to the asset class over the next two years. The average among the 32 respondents will rise from around three per cent to four per cent over the period, the survey found.

‘Investors now recognise that the sustained historical performance of private equity justifies increased allocations. Private equity is not straightforward but that goes some of the way to explaining its outperformance,' said Chris Davison, head of research at AltAssets.

The respondents have an average annual net return on private equity of almost 20 per cent but expect returns to fall to around 13 per cent over the next few years in line with the general deterioration in financial and economic conditions.

UK investors were also asked what frustrated them about investing in private equity. The lack of transparency was described as the most significant irritation, followed by the lack of liquidity.

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