Large U.S. Endowments Cut Private Equity in 2014


Large U.S. Endowments cut their allocations to private equity in 2014 from 15 percent to 12 percent of total assets, according to a report from the Commonfund Institute.

Industry players cited several reasons why allocations were slashed. From the Financial Times:

“Big endowments and other high-profile investors that are trimming private equity target allocations, after years of increasing them, are doing so because of the difficulties they face trying to recycle two years’ worth of exceptional, record-high cash distributions from private equity,” said Antoine Dréan, chairman of Triago, a private equity adviser.

“Many investors feel there are not enough high-quality classic private equity funds currently raising money to permit them to easily reinvest that amount of cash without lowering the level of return they have come to expect from the asset class.”

Private equity managers are unlikely to be losing sleep over this pullback, however. Investors such as the Harvard Management Company said the retrenchment is a cyclical move prompted by the volume of “dry powder” rather than a loss of faith in the asset class. Dry powder, already committed capital yet to be put to work, is sitting at a record $1.2tn according to Preqin, the data provider.

According to the Commonfund report, private equity investments returned around 16 percent for endowments in 2014.


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