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LPs upping PE allocations, crypto industry fund investments on the rise: Coller Capital Barometer

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More than half of institutional LPs have increased their commitments to private equity over the past two years in the hunt for outsized returns, the latest Coller Capital Barometer report shows.

Just 10% of respondents to the survey of 110 private markets investors said they were reducing allocation to the asset class, which saw dry powder balloon to around $1.78tn in February this year.

Big returns are driving that influx of capital, the report shows, with the proportion of LPs with net annual returns of 16% or more across their PE portfolios at near record levels.

The 42% of LPs who now report net annual returns above that figure across the lifetime of their private equity portfolios has been exceeded only once since the Barometer was first published in 2004 – in 2007, in the run-up to the global financial crisis, when 45% of LPs reported the same.

Over 70% of LPs say their private equity assets have outperformed their public equity portfolios since the GFC – and most LPs say they would hit their target private equity returns if each of their funds achieved only the median performance for its fund-type in its vintage year.

The wider cryptocurrency market is one of the biggest growing areas of interest for LP investing according to the report.

Although just 19% of investors already commit or plan to commit to funds that invest using cryptocurrencies, almost a third of LPs have commitments to funds that invest in crypto-enabling businesses – and another 13% of LPs plan to make such commitments.

Similarly, a third of LPs are already committed or plan to commit to funds that invest in the metaverse, a virtual-reality space in which users can interact with a computer-generated environment and other users.

Climate change remains the universal environmental concern for LPs, the report shows, with 93% of LPs reporting that they focus strongly on this risk.

European investors are more focused on most individual ESG risks than their peers in North America and the Asia-Pacific region, Coller said, with biodiversity and deforestation being an especially large concern for them.

Asia-Pacific investors were more focused on air quality than their peers in other regions, the report added.

Coller Capital CIO Jeremy Coller said, “ESG’s positive impact at the individual company level is a reflection of private equity’s unique hands-on management model.

“The managers of private equity funds hold the levers of change for the companies they invest in, in a way that the managers of public equity funds do not.”

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