NEW YORK--(BUSINESS WIRE)--According to a survey released today from Schroder Adveq, a leading asset manager investing in private equity globally, the majority of family offices are investing in private equity but are overlooking opportunities in smaller deals (under $100 million in Enterprise Value) and in markets outside of the United States.
Conducted among family office and private wealth professionals at the Opal Family Office and Private Wealth Conference in Newport, Rhode Island, the survey found that approximately 70% of respondents are invested in private equity, but only one third of those investors (c. 35%) had private equity investments allocated to funds focused on small buyouts.
That said, family offices are beginning to recognize the most attractive characteristics within smaller-sized deals, including greater buy-and-build opportunities and lower purchase prices as the top two reasons. The potential for a larger universe of buyers at the time of exit as well as the opportunity to better diversify investors’ portfolio of managers are additionally cited as top reasons smaller deals are appealing.
“Large buyouts clearly command the most attention, but this leads investors to think this is the preferred or even safest place to find attractive opportunities,” said Ethan Vogelhut, Head of Buyout Investments, Americas. “However, in reality, smaller deals make up the vast majority of the opportunity set for investors, but only 25% of capital goes into these types of deals, offering savvy investors access to an often-untapped and less efficient segment of the market.”
Family offices are also failing to recognize private equity opportunities in emerging markets and in Europe, with only 5% and 6%, respectively, citing these regions as having the most opportunity over the next year. Instead respondents showed a large home-bias towards investing in the U.S. with 75% citing the U.S. as having the most opportunity.
In emerging markets, respondents were most concerned about political uncertainty (32%). Fifteen percent were most concerned about the lack of private equity managers with experience or expertise in emerging markets, while 14% worry that there is not enough information available to fully vet potential investments in the region.
“The survey found that investors’ are not currently taking advantage of opportunities in PE within emerging markets and Europe. This was surprising to us as we see as strong opportunities in both of these regions,” said Steven Yang, Head of Global VC for Schroder Adveq. “Investments in China and India on the emerging market side are offering competitive returns. Opportunities in the small to mid-segment of the Asian private equity market, in sectors like healthcare for example have demonstrated strong growth potential. In Europe, we are also finding opportunities in small to mid-buyouts and turnarounds.”
Additional findings include:
- 28% of family office professionals are finding the most attractive private equity-like opportunities in venture capital, followed by growth (26%), turnaround (12%) and buyout (12%) with 18% finding opportunities in all of these areas.
- Nearly a third (30%) of respondents did not hold private equity investments at all within their portfolios.
Schroder Adveq is a leading asset manager investing in private equity globally. Adveq was acquired by Schroders in July 2017 to complement existing alternatives capabilities and expertise in the real estate, infrastructure and private asset sectors. Together with clients, the firm invests across the full company life cycle through primary and secondary fund investments and direct/co-investments.
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Founded in 1997, Schroder Adveq is a leading asset manager investing in private equity globally and since July 2017, a wholly owned subsidiary of Schroders plc. It offers specialised investment solutions which allow the firm’s clients to access select private market segments through primary, secondary and direct/co-investments.
Schroder Adveq’s client base comprises institutional investors such as pension funds, insurance companies, family offices and other financial institutions located in Europe, North America and the Asia-Pacific region. Many investors of Schroder Adveq are repeat, long-term clients with whom the firm has developed a role as a trusted partner for private market investing.
Schroder Adveq has offices in Zurich, Frankfurt, London, Jersey, New York, Beijing, and Hong Kong.
Further information about Schroder Adveq can be found at www.schroderadveq.com.
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*as at 30 June 2018