Private equity investors expect annual returns of 11% or more from the asset class over the next five years, according to a survey by Coller Capital.

Almost half of the 110 limited partners (LPs) questioned plan to grow their target allocations in the next 12 months, Coller reported.

Jeremy Coller, CIO at Coller Capital, said: “Faced with ever-growing liabilities, high levels of volatility and a low-return world, many insurers and pension plans are finding it hard to make ends meet.

“They do have one great advantage, however – long-term investment horizons. Making full use of the illiquidity premium offered by alternative investments is one good way of closing the gap.”

While three-quarters of respondents said they expected double-digit annual returns from private equity, investors expect broader investment portfolios to struggle.

“One-third of LPs working for public pension plans and insurance companies,” Coller Capital said, “believe their organisations will miss their overall investment target returns in the next 3-5 years, unless there are significant changes in their economic environment or operating models.”

A so-called ‘hard Brexit’, involving “significant restrictions” to the UK’s access to the European single market, was chief among investors’ concerns.

Two-thirds of investors said this would have a negative impact on the European Union, while three-quarters said it would damage the UK.

More than one-third (37%) said returns from European private equity holdings would suffer.

Coller Capital also reported growing interest in private equity real estate and infrastructure investments, while 40% of respondents said they were planning to increase internal resources to focus on direct private equity and co-investments.

Hedge fund allocations are likely to suffer as portfolios of unlisted assets grow, Coller also found.

Nearly 40% of LPs said they would “reduce or stop hedge fund investing in the next 3-5 years”, and one-quarter will begin this process in the next 12 months.