March 28, 2019
For the last several years, leading private markets asset management firm Hamilton Lane has conducted its Private Markets Survey: a forecast of the investment landscape from some of the premier and most influential practitioners in the space. The survey includes input from LPs with a total of $5.5T in AUM, and a GP base which manages $1.4T in assets, and thus provides a comprehensive view on how private markets players currently view the asset class. What did the 2018/2019 Private Markets Survey find? Read on to find out:
Trends in Private Equity: LP Allocation
As expected, a majority of LPs don’t allocate to the private markets for one single reason, but rather for a combination of factors. Further, tracking and explaining a combination of factors to an investment committee or board can be challenging for LPs. This is why many LPs might pursue technology platforms like Cobalt LP to help simplify reporting and analysis.
My allocation to the private markets is:
Source: Hamilton Lane Private Markets Survey, 2018/2019
Trends in Private Equity: Changing Allocation Targets
We’ve said it again and again, but LPs are investing for the long-term. Sixty-one percent of respondents would not change their private markets allocation targets, even if their portfolio underperformed over the next four years. How are LPs determining future underperformance? LPs might rely on a forecasting model to determine future performance. For example, Cobalt LP contains a forecasting model allowing LPs to model their portfolio under different economic scenarios.
If my private markets portfolio underperforms the public markets for this many years, I will begin to change my allocation targets:
Source: Hamilton Lane Private Markets Survey, 2018/2019
Trends in Private Equity: Measuring Outperformance
Often outperformance offsets the risks of investing in private equity – but LPs can have very different performance metrics to which they are held. Most (70 percent) are focused on outperformance on either a 5- or 10-year basis. For further information, check out our post around private markets outperformance over a longer time horizon.
My board/decision-making body is focused on outperformance between publics and privates on a:
Source: Hamilton Lane Private Markets Survey, 2018/2019
Final Thoughts
The Hamilton Lane Private Markets Survey 2018/2019 discovered how LPs approach private markets investing. Through using technology solutions like Cobalt, LPs are able to delve into further insights, benchmark their portfolio and create dynamic reports.
To learn more about Hamilton Lane’s Private Markets Survey, click here.
