Despite ongoing geopolitical tensions, allocations to private equity have continued to rise.
According to Montana Capital Partners’ 12th Annual Investor Survey, 30 percent of institutional investors and 75 percent of family offices now allocate over 15 percent of their portfolios to private equity – an increase of 7 and 4 percentage points, respectively, compared to 2023.
Secondary market investments on the rise
Allocations to secondaries have also grown. Currently, 13 percent of institutional investors and 12 percent of family offices dedicate more than a quarter of their private equity portfolios to secondaries, up from 8 percent and 10 percent last year.
Nearly 70 percent of investors view secondaries as a strategic choice in today’s market. Marco Wulff, Managing Partner and CEO of Montana Capital Partners, explains: “Many investors are looking to make parts of their portfolio more liquid, which is expected to create sustained momentum for secondaries investments.”
Optimism in private equity performance
Investor sentiment around private equity performance is optimistic. While last year over half of respondents anticipated declining multiples, 74 percent now expect them to remain stable or even rise.
Preferences for generalist funds
A third of respondents (35%) prefer generalist secondaries funds, which combine the advantages of GP- and LP-led transactions. Only 19 percent favor specialist funds, with the remainder expressing no clear preference. However, specialization of investment teams in specific transaction types remains an important consideration when selecting secondaries managers.
Popular sectors and the role of AI
Technology, healthcare, and business services continue to be the most attractive sectors for private equity, cited by 68 percent, 67 percent, and 62 percent of investors, respectively. Interest in financial services is growing, with 25 percent of investors now viewing the sector favorably, compared to 18 percent in 2023.
Regarding artificial intelligence, 26 percent of investors expect portfolio companies to benefit from AI advancements, while 28 percent believe it is too early to determine its full impact.
Risks and challenges
Geopolitical tensions have emerged as the top concern for 41 percent of respondents, a significant increase from 15 percent in 2023. Other concerns include inflated private equity valuations (25 percent, up from 21 percent) and the risk of an economic recession (22 percent, down from 32 percent).
Read also: The market for secondaries is growing
