Private equity LPs lacks skills, but confident of getting return

The majority of private equity limited partners (LPs) claim the LP community lacks the skills, experience and processes to make successful investments, a survey reveals.

Data from the Coller Capital Global Private Equity Barometer winter 2015/16 survey, found just 16 per cent of co-investing LPs believed they had the necessary skills and experience to make successful investments.

However, despite the pessimistic outlook about their investment knowledge, 86 per cent were optimistic they would deliver net annual returns of more than 11 per cent over the medium-term.

When it came to the challenges facing LPs, 71 per cent cited the time constraints as a barrier to successful co-investing, while 55 per cent said, "having a limited understanding of co-investment performance drivers", hindered the success of investments.

Fifty per cent said "the inability to recruit staff with the requisite skills," was preventing them from making successful co-investments.

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The survey also found that LPs believed that size matters when it comes to their ability to successfully co-invest, with 71 per cent of reporting that small investors are disadvantaged by the volume of money being committed by larger investors.

Almost three-quarters of Asia-Pacific and North American respondents reported that the degree of freedom an LP has makes a material difference to its private equity returns.