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Antonia Lee looks at investor appetite for private equity co-investments, presenting examples of investors that have recently made such commitments, and those that plan to do so in the near future.

Several Investors Have Made New Co-Investments Recently How does investor appetite for Teachers’ Retirement System of the State of Illinois (TRS) recently made three co-investments. The $40.8bn co- co-investments vary by region? invested alongside three private equity fund managers, Madison Dearborn Partners, MBK Partners and Riverstone Holdings, within Chart of the Month: LP Plans for Co-Investment Activity by Investor Location the healthcare, and energy sectors respectively. TRS

currently allocates 11.5% of total assets to private equity, above 100% its target allocation of 11.0%. It typically commits around $1bn to private equity annually, including co-investments. 90% Increase Co- 80% 46% Investment Activity 51% London Pensions Fund Authority (LPFA), a £4.75bn public pension 70% 67% 63% fund, and Adveq, a $5bn private equity manager, Maintain Co- 60% have co-invested alongside Next Wave Partners in Secured Mail, Investment Activity which specializes in effi cient bulk mail and e-commerce packet 50% Decrease Co- delivery. LPFA, which currently allocates 8% of its total assets to 40% Investment Activity private equity, is approaching new private equity commitments 40% 30% 36% opportunistically over the next 12 months. Adveq is actively 11% 0% Uncertain seeking new private equity opportunities through its latest fund of 20% 38% Proportion of LP Respondents 0% funds vehicle. 10% 1% 22% 14% 12% 0% 0% New Mexico Educational Retirement Board has awarded a new Europe North Asia Rest of co-investment mandate to BlackRock Private Equity Partners America World (BlackRock PEP). The public pension fund committed $100mn to Blackrock/ERB Tactical Opportunities Fund I, which will be Investor Location invested in co-investment opportunities on its behalf by BlackRock Source: Preqin LP Co-Investment Survey, February 2014 PEP. This is the third co-investment multi-manager mandate the pension fund has awarded to the private equity fund of funds In February 2014, Preqin conducted a survey of 140 LPs based manager. In 2009 it committed $100mn to BR/ERB Co-Investment across the globe in order to gain insight into the activities and Fund I and in 2013 it committed another $100mn to BR/ERB Co- attitudes of institutional investors currently interested in co- Investment Fund II. BlackRock PEP is currently raising capital for investments. As a part of the survey, LPs shared some detail on its third co-investment multi-manager vehicle, BlackRock Private their intended plans for future activity in the space. The Chart Opportunities Fund III, with a target of $300mn. of the Month shows the proportions of respondents that plan to increase, decrease or maintain their current levels of co- LPs Are Planning to Increase their Co-investment Activity investment activity by investor location. Most notably, only 1% of North American LPs that participated Northwestern Mutual Life Insurance Company (NMLI) expects to in Preqin’s dedicated survey and no LPs in any other region make 10 co-investments over the next 12 months. The $165bn indicated that they would be decreasing their co-investment insurance company is an active co-investor alongside its private activities in the coming year. The response stated by largest equity fund managers, with co-investments representing 30% proportion was consistent across all regions: LPs are looking to of its entire private equity portfolio. It is looking to make 10 co- increase their co-investment activity. Specifi cally, 67% of Asian investments during 2014, with both existing managers in its portfolio LPs intend to do so, compared to 51% and 46% of investors and managers it had not previously worked with. It typically co- based in North America and Europe respectively and 63% of invests in Europe and the US, co-investing between $10-75mn per LPs based outside of these core regions. deal.

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