By Michael Newman, CAIA (AllAboutAlpha.com Editorial Board) Recently the Financial Times reminded us what a challenging time the private equity industry is facing by highlighting Coller Capital’s semi-annual Private Equity Barometer.  The Barometer is a survey collected from approximately 120 institutional investors with allocations to private equity.  Coller, as a secondaries specialist, is keen to discern the sentiment and expectations of private equity investors as it has a direct impact on their own opportunity set within the secondary market for private equity investments.  However, in reporting on the survey results, the FT focused almost exclusively on the possibility of defaults and the continuing difficulties private equity faces:

One in 10 investors in private equity are likely to default on commitments to invest funds in the next two years, research has suggested.  The findings underline the scale of challenges facing the sector as it scrambles to adapt to a harsh new environment of falling returns, cash-strapped investors and a backlash from regulators and politicians.

However, in looking at the details of the survey, not all is doom and gloom for the private equity industry.  Moreover, there are some bright spots that institutional investors in private equity, both old and new, should focus on as they look to continue their commitment to the asset class.

Is Private Equity Here To Stay?

Another eye grabbing data point from the survey is that over 20% of surveyed investors expect to decrease their private equity allocations.  But is this really any surprise?  With equity markets still down 40% from their peaks, it’s only logical that institutional investors must re-balance their portfolios.  With private equity valuations generally lagging the market, it’s logical that pension managers would feel over exposed and decrease future asset allocations in the near term. More…