More than half of European limited partners and a third of US LPs believe private equity should be accountable to a wider group of stakeholders at larger portfolio companies, according to Coller Capital’s Private Equity Barometer.
Private equity has suffered a year of unprecedented scrutiny on both sides of the Atlantic in 2007, culminating in self-regulation via the Walker Report in the UK. Similar reforms have yet to be put in motion in the US.
Jeremy Coller, chief executive of Coller Capital, said: “The response gives you a sounding of the extent to which the debates about private equity have been stormier in Europe than they have been in the US. This is also partly because business culture in the US is very entrepreneurial and there is a reluctance among investors to do anything that might hold businesses back.” Coller said by contrast business in Europe is expected to take more account of social responsibility issues.
Europeans believe greater transparency “will get rid of some of the tensions between private equity and its critics” while in the US the debate has been less heated, he said.
Fifty percent of European LPs believe European venture will be similarly attractive to its US rivals within five years, as opposed to 25 percent of investors in the US.
“There’s a perception lag surrounding European venture.” It has probably improved more than its critics give it credit for, Coller said, but it is mainly European investors who have a greater exposure to European venture that have fully recognised the change.
More than half of private equity investors and 78 percent of US LPs also believe the credit market’s recent difficulties signal the end of the global buyout boom. Forty eight percent believe North America will be more affected than other regions of the world by a private equity downturn.
But Coller said it would not be sensible to read too much into the seeming bearish outlook on the US. “It's not a question of either/or – it's just that you also need to be investing in the newer areas of private equity,” he said.
“There are some established US managers which if you weren’t in at the beginning you can’t get in anymore.” Investors are attempting to find these managers of the future in emerging markets, he said.
More than a fifth of established LPs are trimming down the number of relationships with GPs, said Coller.
Around three quarters are still experimenting to find the best managers. The more established are pruning portfolios in order to only include those that make the best, most consistent, returns, he said.
But while this process of manager selection continues, 66 percent of LPs invest in first time funds. More investors are also allocating to emerging markets with 40 percent investing in private equity in these economies as opposed to 26 percent two years ago.