GLOBAL - One-in-five global private equity limited partners (LPs) said that they are likely to reduce their exposure to Europe as a result of the euro-zone sovereign debt crisis, according to the latest Coller Capital Global Private Equity Barometer.

A majority - 57% - identified the 'wall of refinancing' of buyout debt due in 2013 - 2015 as a further threat to the private equity industry.

However, more than two-thirds of North America LPs and a majority of Europeans predict that 2012 will turn out to be a good or excellent year, with almost half expecting the pace of investment - and capital drawdown - to pick up as a result.

A full 87% of LPs have received requests to extend the investment periods of funds in their portfolios to take advantage, and 78% expect to get such requests over the next 2-3 years.

Uncertainty about the direction of the euro-zone crisis and the medium-term availability of finance also appears to be influencing LPs' appetite for risk, with most North American and European investors intending to increase their commitments to mid-market and small buyout. Of European LPs, 27% intend to reduce new commitments to large deal sizes of $1bn (€750m) or more, with one-third of North American LPs pursuing a similar tactic.

Coller Capital partner Stephen Ziff commented: "The dust is beginning to settle around a new and developing private equity landscape."

"Particularly among the more seasoned North American LPs there is a view that 2012 will turn out to be a good vintage year - but you have to balance that against the one-in-five who are concerned about the problem child of the euro-zone."

But even here Ziff suggested that tentativeness could be down to a lack of clarity rather than a simple vote of no-confidence.

"Investors are essentially in a 'who the hell knows?' holding pattern at the moment," he said. "I suspect that if we ask them in six months' time, when there is perhaps more clarity on where things are going, we may get the view that this is a great time to invest - I just don't think they are there yet."

With the investment opportunity opening and the capital calls picking up, it remained to be seen whether LPs would have the liquidity to take advantage, the company said.

The situation was not helped by so-called zombie funds - where general partners (GP) with no prospect of carried interest were being motivated to keep funds going for their management fees alone. Around half of LPs - and 57% of North Americans - believed their portfolios were infected with zombies, and 94% of those think that they will find a solution only in a minority of cases.

But the zombies appear to be an irritation rather than a major problem. Half of LPs still expected to achieve net returns of at least 11% over the next 3-5 years, and 83% planned to maintain or increase their target allocation to private equity over the next 12 months - broadly in-line with their intentions expressed in recent Barometer surveys.

"There are some big challenges ahead, not least the wall of refinancing that was pushed out by amend-and-extends from 2009 to 2013-15," said Ziff. "But it's clear that investors still have a positive view on private equity relative to other asset classes. Expectations for returns are approaching pre-crisis levels again."

The 'Winter 2011-2012 Global Private Equity Barometer' was the fifteenth edition of the semi-annual survey, canvassing the views of 107 LPs in August and September 2011. European LPs accounted for 40% of the respondents, while 23%, globally, were pension funds.

A separate survey of 33 LPs and 27 GPs by private equity placement agent Acanthus Advisers uncovered a less harmonious relationship.

While the survey found that only 12% of LPs and 11% of GPs described the overall GP/LP relationship as weak, and a majority of LPs (58%) believed the investor relations process had improved over the past year, there were profound disagreements over the strength of investor protection clauses, the amount of personal money GPs should put into their own funds, and the quality of communication (in both directions).

"As a huge number of funds come to market over the next year, chasing scarce capital, the quality of a GP's communications and relationships will in many cases be a decisive factor," said Armando D'Amico, managing partner of Acanthus Advisers.