1. Executive Summary

Executive Summary - Sample Pages 1. Executive Summary 2011 was another turbulent year for private that closed in 2011, up from $277bn by funds Fig. 1.1: All Private Equity Fundraising by Quarter, Q1 2004 - Q4 2011 equity fundraising. A considerable 62% of that closed in 2010. Though the increase is investors Preqin spoke to back in December modest, 2011 is the first year since 2008 that 250 2010 planned to make new commitments to there has not been a fall in the aggregate 212.5 210.4 private equity funds over the course of 2011, capital raised by private equity funds. 204.2 and an encouraging 68% of investors that 200 174.7 were looking to invest planned to commit Investor Appetite and Impact of Market 168.7 more capital in 2011 than they did in 2010. Volatility 152.5 150 Fundraising did indeed pick up in the first half 140.8 131.8 128.4 123.8 127.9 of the year, and we saw a quarter-on-quarter Although financial markets remain 119.3 101.6 110.0 increase in capital raised by closed funds, unpredictable, a significant 73% of investors 100 95.4 85.3 87.3 from $55.9bn in Q4 2010 to $87.3bn in Q2 we spoke to in December are planning 79.1 74.578.8 79.9 69.6 68.2 57.0 61.5 62.4 2011 (see Fig. 1.1). to make new private equity commitments 57.5 55.9 52.6 52.2 53.1 over the course of 2012. Furthermore, of 50 48.7 However, the second half of the year saw those planning to invest in 2012, 27% plan Commitments ($bn) Aggregate disappointing levels of fundraising as the to commit more capital while 49% intend to crisis within the eurozone impacted on wider commit at the same rate as they did in 2011 0 financial markets, and Q3 saw the amount (see Fig. 1.2). Another 12% of LPs making of capital raised dip to its lowest point since new commitments in 2012 are returning to Q12004 Q22004 Q32004 Q42004 Q12005 Q22005 Q32005 Q42005 Q12006 Q22006 Q32006 Q42006 Q12007 Q22007 Q32007 Q42007 Q12008 Q22008 Q32008 Q42008 Q12009 Q22009 Q32009 Q42009 Q12010 Q22010 Q32010 Q42010 Q12011 Q22011 Q32011 Q42011 Q4 2004, with 137 funds closing on $53.1bn, the asset class having held off from making before there was a slight uptick again in Q4 new commitments in 2011, suggesting 2011. that several investors are becoming more Like many investors we spoke to, an Australian Nineteen percent of investors interviewed told confident about the opportunities on offersuperannuation scheme feels that: “Public us they view private equity more negatively Despite the increased volatility within within private equity. markets are more volatile and risky in times as a result of volatility in wider financial financial markets, many investors remain like this, so private equity becomes more markets; some voiced concerns that public optimistic about the opportunities on offer A significant 61% of investors told us that attractive.” A Canadian endowment told us: market losses are increasing the risk of the within the private equity asset class, and 66% recent volatility in wider markets, and in “[There is] more value in private equity after denominator effect in their private equity of investors we spoke to in December 2011 particular the sovereign debt crisis in Europe, [the] fall in public markets.” Many investors we portfolios, whereas others had concerns told us they had made new commitments to has not impacted upon their opinion of the spoke to also feel that the current climate in about maturing funds within their portfolios the asset class over the course of the year. asset class; in fact one fifth of investors feelEurope is opening up opportunities in certain being able to realize their investments. Private equity fundraising remains muted in more positive towards private equity as a markets, as a Singaporean investment comparison to the years prior to the financial result of the problems in the eurozone. Full company acknowledged: “The volatility has Key Geographies for 2012 crisis, but some encouragement can be analysis of the results of our December 2011 not negatively influenced our attitude towards taken from the fact that the aggregate capital investor interviews are available within the private equity since we feel there could be As the more developed private equity markets received by funds that closed in 2011 saw a body of the 2012 Preqin Limited Partner opportunities in the current situation in terms in Europe and North America face economic slight increase on the capital raised by funds Universe. of distressed assets in need of funding.” instability and stricter regulations, investors closed in 2010, with $278.3bn raised by funds are increasingly looking to opportunities © 2012 Preqin Ltd 1 Executive Summary - Sample Pages in other regions. A significant 60% of Furthermore, 99% of investors that invest in Fig. 1.2: Amount of Capital Investors Plan to Commit to Private Equity Funds in 2012 Compared investors we spoke to in December feel emerging markets expect to maintain (66%) to 2011 that Asia is presenting attractive investment or increase (33%) their allocation to such Significantly More opportunities in the current market. Forty-two regions over the next 12 months. Capital in 2012 than in percent of LPs named North America as an 12% 6% 2011 attractive region to invest in at present (see The 2012 Preqin Limited Partner Universe 2% Slightly More Capital in 21% Fig. 1.3). Despite recent uncertainty in the 2012 than in 2011 contains profiles for over 2,800 institutional 10% eurozone, 37% of investors feel that regions investors in private equity, and includes within Europe are presenting attractive information on their geographic and strategic Same Amount of preferences, as well as a sample of the Capital in 2012 as in investment opportunities. Specific regions 2011 within Europe that were named by investors previous private equity fund investments Slightly Less Capital in as offering appealing opportunities at present they have made. 2012 than in 2011 include the Nordic region as well as countries in Central and Eastern Europe. GP Relationships 49% Significantly Less Capital in 2012 than in 2011 Importantly, 70% of investors told us that Although the majority of LPs have capital they are not avoiding any regions where they available and are ready to make new fund Did Not Invest in 2011 would have previously considered gaining commitments, fund managers on the road but Investing in 2012 exposure in light of the current financialare likely to face tough challenges in the climate, including one Singapore-based coming months; with a record number of investment company which commented: funds in the market investors remain highly “There is always an opportunity in a crisis. selective about the managers they choose to Fig. 1.3: Regions Investors View as Presenting Attractive Opportunities and Regions Investors Are Even in situations like the one currently in work with. Avoiding in the Current Financial Climate Europe, for example, distressed assets could always be a draw so we are keeping our Managers should be aware that while a 80% options open and not ruling out investing in considerable 84% of investors are likely 70% 70% any region.” Eighteen percent of LPs told us to add some new GPs to their portfolios, Regions Investors View they will avoid certain regions within Europe several are also likely to terminate some 60% as Presenting Attractive as a result of the current climate; within existing relationships if managers do not 60% Opportunities in the Europe investors named Southern Europe, meet their high expectations or increasingly Current Financial 50% Climate Greece, Italy and Spain as areas they would stringent investment criteria. Therefore 42% avoid in the current financial climate. Twelve managers planning to launch follow-on funds 40% 37% percent of investors are avoiding funds in the coming months should closely monitor Regions Investors Are targeting Rest of World (regions outside of their existing LP base in order to assess 30% 26% Avoiding Due to the North America, Europe and Asia). which LPs they expect will re-up with them, Current Financial and thus ascertain how much capital they 20% 18% Climate, Where They Emerging markets continue to attract strong will need to attract from new investors when of Respondents Proportion 12% Would Have Considered 8% Investing Before interest from investors. Seventy-six percent of beginning the fundraising process. More than 10% 6% investors will consider investing in emerging a quarter (26%) of funds that closed in 2010 2% markets, an increase of six percentage points and 2011 have an investor base consisting 0% Europe North Asia Rest of World None from December 2010, when 70% of investors of a majority of investors that they had not America were open to investing in emerging markets. previously worked with. © 2012 Preqin Ltd 2 Executive Summary - Sample Pages Investors continue to be reluctant to commit and then receive a follow up call from the Fig. 1.4: Investors’ Preferred Method of Contact from Fund Managers to funds raised by new teams: 55% of GP. Just 5% of investors prefer to receive investors told us they will not consider an introductory call from a manager without investing in a first-time fund over theany next prior contact, while 9% of investors Receive Email with Fund Documentation and No Follow-up Call 31% 12 months. Just 18% of LPs told us they named other ways in which they would like from the Fund Manager would readily invest in a first-time fund overto be approached, including receiving fund the next 12 months, and an additional 17% documentation in hard copy through the Contact via Investment Consultant would consider committing to a first-time fund post, contacting a specific person within 27% should they see an appealing opportunity.

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