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mcp’s 5th study on investment behaviour of family offices and foundations

Press release:

Family offices and foundations express strong confidence in private equity

  • 92 percent of respondents either increased their allocation to private equity or maintained it over the past year.
  • 38 percent are planning to further increase their exposure to private equity over the next 12 months. This is a strong "vote of confidence" for the asset class.
  • With the prospect of increasing interest rates, a record proportion of respondents indicate that GPs buying into companies at too high valuations is their biggest concern.
  • The share of respondents who are active in the secondaries market, both as a potential investment and as a tool to seek liquidity solutions, has increased to the highest level since this survey began.

London/Zug, 12 December 2017. A new survey published jointly by Private Equity International and Montana Capital Partners shows that over 90 percent of family offices will either maintain or increase their exposure to private equity.

Private Equity International and Montana Capital Partners carried out the fifth annual family office and foundation private equity survey in September, to reveal the investment preferences and appetites of these institutions. If you are interested in the report entitled 'Vote of Confidence', please send us an email to ue.pc1558487641m@ofn1558487641i1558487641.

According to the results, family offices and foundations are more active investors in private equity than ever, with 80 percent of respondents allocating more than 10 percent of their investment portfolios to the asset class and almost a third allocating more than 20 percent. In 2018, 95 percent of those surveyed will either increase or maintain their exposure to private equity. This is a strong signal and shows the attractiveness of private equity as an asset class compared to others. As these investors are non-regulated, they can benefit from larger allocations to private equity and higher expected returns.

As in previous surveys, mid-market buyout remains the preferred strategy and received a 70 percent response compared to 58 percent last year. Real estate and infrastructure have comparatively declined in popularity.

Over 70 percent of respondents are active in the secondaries market in some capacity; the highest proportion since this survey began. Secondary directs, GP-led transactions, and small secondaries were selected by investors as the most popular strategies to prioritise in the next 12 months, while large fund portfolio acquisitions were regarded as the least promising. Attractive pricing in the current market, long-term strategy and manager performance continue to rank among the most likely reasons for active portfolio management via secondaries. It is therefore unsurprising that almost three quarters of respondents think that secondaries deal volume will continue to increase in the next 12 months.

As interest rates remain low, a record number of respondents cited GPs buying into companies at too high valuations as their biggest market concern. An economic slowdown leading to decreasing EBITDA growth was also the main concern shared by 42 percent of respondents.

Fewer respondents are concerned about the impact of Brexit compared to last year, when Britain's decision to leave the EU was more recent. Concern over the significant impact of protectionist policies on portfolio planning, particularly in the US, was shared by just 13 percent of respondents.

Marco Wulff, partner at Montana Capital Partners, commented: "Our survey shows just how confident sophisticated investors like family offices and foundations are in private equity as an integral part of their investment portfolios".

"We are particularly pleased to hear that the role of secondaries has further increased, both from an investment perspective and as a tool to seek liquidity solutions," adds Christian Diller, partner at Montana Capital Partners.

Toby Mitchenall, senior editor at Private Equity International, commented: "Family offices are often built on an entrepreneurial spirit that lends itself well to investing in private equity. As investors they are happy with concentration risk and illiquid investments. For these reasons they are becoming an increasing force in private equity, both as limited partners in funds and as direct investors."


Methodology

Single family offices, multi-family offices, foundations and endowments globally were surveyed by email in September 2017. A smaller group of investors were then interviewed by telephone to give insight into the results.

 

If you are interested in this topic, please feel free to contact us under ue.pc1558487641m@ofn1558487641i1558487641

Montana Capital Partners