Private equity managers under threat

Up to a quarter of global private equity managers could disappear as a result of the financial crisis, according to the latest Coller Capital Global Private Equity Barometer report.

According to the results of a survey of investors in this sector, investors believe 28 per cent of venture capital managers and 23 per cent of buyout firms will not be able to raise additional capital in the next seven years, which means they will cease trading.

However, those that remain will offer more attractive investment terms, the report found.

About 80 per cent of investors expect the terms and conditions of new buyout funds to become more favourable to them, and a majority — 66 per cent — expect the same for new venture funds.

The report also found investors want some changes to the sector to improve areas such as transparency and risk management.

More than half of investors worldwide — and as many as three-quarters of investors in the Asia Pacific — think a significant number of managers need to improve in these areas and one in 10 think most funds need to improve.

However, the threat of regulatory changes will also have a serious impact on how these funds work, investors believe.

Many investors are worried that regulatory and tax changes will inflict more far-reaching damage on the asset class, the report found.

Half of investors think this is likely to happen in Europe, and more than half expect the same to occur in North America.

According to the report, a third of investors are planning to drop their private equity managers and 52 per cent expect financial constraints will reduce their ability to invest in the sector.

Coller chief investment officer Jeremy Coller said the private equity industry faces challenging times ahead.

“Scarce capital, slower returns and political uncertainty are the immediate future for our industry,” he said.