As allocations to private markets skyrocket, an increasing number of investors are putting upward of $1 billion into private equity.
This ‘Billion Dollar Club’ now includes 359 allocators, up 14 percent from 315 in 2017, according to a statement Thursday from Preqin, an alternative-assets data provider. Members include the Canada Pension Plan Investment Board, with a massive $54.8 billion allocation to private equity, and the Kuwait Investment Authority, which has $52.4 billion invested in the asset class.
In total, the group is responsible for $1.54 trillion in private equity allocations, or more than half of all assets under management.
Their large investments give them “tremendous influence in shaping standards, influencing fee negotiations, and gaining access to oversubscribed vehicles and alternative methods of accessing the asset class,” Christopher Elvin, Preqin’s head of private equity products, said in the statement.
Still, these advantages for big investors can put other industry participants at a disadvantage.
“It creates challenges for other investors and fund managers alike,” Elvin said in the statement. “Club members may make it more difficult for other investors to access vehicles that are already in high demand, and the size of their commitments mean that even though they are more likely to consider first-time funds than other investors, they may be difficult to accommodate for many fund managers.”
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According to Elvin, the growing number of investors with $1 billion-plus allocations indicates the “growing importance that private equity investments are having for institutions with demanding return objectives.” Across all private equity investors, the average allocation to the asset class is 8 percent. The ‘Billion Dollar Club,’ meanwhile, has an average allocation of 10.6 percent.
Just under a third of these big investors are public pension funds, while about 16 percent are private sector pensions, according to Preqin. Twelve percent are insurers, while another 10 percent are endowments and foundations. More than half are based in North America, although the ten largest private equity investors hail from a diverse range of locales including the United Arab Emirates, the Netherlands, and China.
The largest U.S.-based investor in private equity is the California Public Employees’ Retirement System. The $356.5 billion pension currently has $26.9 billion invested in the asset class, and is reviewing a direct investing program to support future commitments to private equity.