A typical buyout made today will fail to produce double-digit returns. So say the majority of respondents to an in-depth LP and GP survey conducted by online private equity marketplace Palico.
The survey found that 59 per cent of GPs and LPs did not expect the average buyout to earn at least 10 per cent annually amid high purchase prices. However, although expectations for double-digit returns from private equity are muted, 52 per cent of LPs running a range of alternative asset programmes said that private equity funds will produce better returns than hedge funds.
The lower return expectations also do not appear to be putting off investors from backing the asset class with almost four fifths (79 per cent) of LPs and GPs expecting private allocations to rise relative to other asset categories this year.
Another notable finding was that investors and managers are becoming more comfortable with fund restructurings, with 65 per cent saying that such restructurings are positive on balance.