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US institutional investors to allocate more capital to private equity

In 2004 US institutional investors increased their allocations to private equity to 3.4 per cent of total assets, from 3 per cent in 2003, according to research published by Greenwich Associates. Greenwich Associates expects that further growth could be ahead. About 30 per cent of US institutional investors plan sizable additions to private equity in the next three years.

At the same time US public and private pension plan sponsors, endowments and foundations reduced their average fixed-income holdings to 23.7 per cent of total portfolio assets in 2004, from 26.8 per cent in 2003.

'Of course, it is important to view these expectations with some degree of caution,' said Greenwich Associates consultant William Wechsler. 'Despite several years in which pension plan sponsors have predicted meaningful increases in their hedge fund activity, hedge fund allocations have only increased from 1.0 per cent of total assets to 1.6 per cent from 2002 to 2004.'

Greenwich Associates is a research-based consulting firm, specialised in institutional financial services.

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