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Pension funds 'to double' private equity holdings

GLOBAL- Private equity investment will continue to grow over the next ten years and pension funds in the US and Europe are expected to double their allocation to the asset class according to a new report by the Economist Intelligence Unit.

The report, produced in conjunction with the private equity company Apax Partners, maintains that the private equity industry will continue to grow as investors appreciate it is only marginally more risky than listed equity.

“The distinction between private and public equity has begun to narrow and the best private equity firms have delivered consistently high returns over many years,” says Apax chairman Ronald Cohen.

Easier access to private equity funds for investors, better exit opportunities through financial marrkets and continued outperformance will also help promote the sector.

“Pension funds especially are going to need high returns if they are to pay for the growing retirement needs of fast-ageing populations. Public and private pension funds, the largest contributors to private equity, are expected to double their average allocation to about 15% of total funds in the US and about 7% in Europe over the next 10 years,” says the report.

It also suggests northern Europe is now more conducive to eentrepreneurs than the US. It says that, although the US remains the world leader in private equity and entrepreneurship, north European countries will provide the most hospitable framework for entrepreneurs, with the Netherlands, Denmark and the UK filling the top three positions.

Other European countries attractive to private equity include Switzerland, Finland, Sweden, Germany and France. The ranking, based on the Economist’s entrepreneurial network, reward countries that lack red tape, are friendly to private enterprise, have an equitable tax regime, an open and well-developed financing system and a flexible labour market.

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