Coller Capital | Pension360

Report: Institutional Investors Plan to Increase Private Equity, Decrease Hedge Fund Allocations in 2015

A Coller Capital report released Monday showed two strong trends in institutional investor sentiment.

Forty percent of investors are planning on increasing their allocations to private equity in 2015. Meanwhile, 33 percent of those same investors said the see themselves decreasing their hedge fund portfolios.

More from Money News:

Ninety-three percent of investors believe they will get annual net returns of more than 11 percent from their private equity portfolios over a three- to five-year horizon, the survey showed, up from 81 percent of investors two years ago.

Last year saw a record $568 billion of distributions from private equity, compared with $381 billion in 2012, according to figures from data compiler Preqin.

“What you’ve seen over the last two years is distributions from the private equity portfolio have been very, very strong, which will give investors a cause for optimism,” said Michael Schad, Partner at Coller Capital.

“Four years ago people might have had questions on the 2006-2007 vintage. But these funds have really turned around,” Schad added, referring to funds raised in the years just before the financial crisis.

That optimism contrasted with the one-third of investors that said they would decrease their allocation to hedge funds, following poor performance from many such firms. Major U.S. pension fund CalPERS made a high-profile withdrawal from hedge funds in September.

Hedge funds on average have gained just under 5 percent this year through November, according to data from industry tracker Eurekahedge, against a 10.2 percent rise in the S&P 500 U.S. equities index.

The full report can be read here.

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Private Equity Likely to Target 401(k)s As Next Big Capital Source

According to a survey released Monday, nearly 90 percent of institutional investors believe that defined-contribution (DC) plans are firmly in the cross-hairs of private equity firms.

Reported by Investments and Pensions Europe:

Coller Capital’s latest quarterly Global Private Equity Barometer suggests the world’s limited partner (LP) community is almost unanimous in its expectation that defined contribution (DC) pension schemes will become a source of private equity capital over the next five years.

The findings, based on the private equity secondaries specialist’s survey of 114 investors worldwide, also show growing enthusiasm for private equity in general, and buy-and-build and private credit in particular – despite some concern over what the exit environment for private assets might look like in 3-5 years’ time.

Almost nine out of 10 investors see DC providing private equity capital within five years, with 27% of European LPs believing DC schemes will provide “significant” capital to the asset class.

Stephen Ziff, a partner at Coller Capital, said: “The backdrop to the finding about DC assets going into private equity is one of more capital in general moving into alternatives, and private equity in particular.

“But in addition there has been a shift in the pensions landscape over the past several years, and GPs are certainly looking for new sources of capital. The industry is slowly starting to get to grips with the challenges, to varying degrees – particularly features of DC investments like liquidity and daily pricing.”

The survey interviewed a representative sample of institutional investors, including pension funds and endowments, based across the globe.

Photo by TaxCredits.net

PE Executive To Become First CIO of Japan’s Largest Pension Fund

Japan will appoint a private equity executive, Hiromichi Mizuno, to the newly created Chief Investment Officer post at the Government Pension Investment Fund, the largest public pension fund in the world.

Hiromichi Mizuno is a partner at private equity firm Coller Capital.

More details from the Wall Street Journal:

The appointment would put the 49-year-old from central Japan in control of the world’s biggest fund of its kind as it tries to boost returns with more aggressive investments.

Mr. Mizuno would be a big catch for the fund, which has struggled to attract outside talent because of low salaries and a small budget. Despite its size, the GPIF’s roughly 80 employees are squeezed into one floor of a 1970s office building in downtown Tokyo and most of its investments are managed by outside asset management firms.

Mr. Mizuno was educated in the U.S. and speaks fluent English, which addresses concerns of foreign investment firms that had trouble working with GPIF.

[…]

The GPIF is headed by its president, Takahiro Mitani, who has ultimate decision making power under the current law, but Mr. Mizuno would be de facto in charge of overseeing important investment decisions. Rather than make investments himself, Mr. Mizuno will spend more time choosing professional fund managers to oversee portions of the fund’s investments.

Mr. Mizuno joined the GPIF as an adviser and a member of its investment committee, an eight-member group that advises the fund part-time, in July. At a news conference last month, Mr. Mitani said described Mr. Mizuno’s expertise in private equity as “invaluable.”

The Government Pension Investment Fund manages $1.1 trillion in assets.

Photo by Ville Miettinen via Flickr CC License