Study: Debt allocations tick upwards

  Recent Adveq/London Business School research on public and private pension funds’ private equity allocations reveals how demand for debt-related assets has grown over time.   

Public and private pension funds more than doubled their allocations to debt strategies as a component of their private equity portfolios between 2005 and 2012, according to a recent report published by asset manager Adveq in partnership with the London Business School’s Coller Institute of Private Equity.

The report, which culls information from 1,208 pension funds, found that the average allocation to debt strategies within large pension fund’s private equity portfolios grew from 5.03 percent in 2005 to 13.27 percent in 2012. Although less pronounced than in larger pension systems, the average allocations to debt-related strategies in small and medium sized pension’s private equity portfolios grew from 3.61 percent to 7.44 percent and 4.35 percent to 11.38 percent over the same period, respectively.

The study also includes data on how LP appetites for private equity have evolved over time. While public pension funds increased their allocation from an average of 4.5 percent to 5.64 percent between 2005 and 2012, the concentration of private equity strategies within sovereign wealth fund investment portfolios has declined.

Sovereign wealth funds averaged a 21.82 percent allocation to private equity in 2005, compared to just 15.86 percent in 2012.