The private equity industry hasn’t lowered investment expecations in the wake of the financial crisis, a new survey finds.

According to a new report from BMO Capital Markets, mergermarket and Akin Gump Strauss Hauer & Feld LLP, the majority of North American private equity practitioners surveyed claim that their targeted returns have remained unchanged or increased over the past few years.

Of the investors surveyed, 76% indicated that their return expectations were equal to or higher than prior year expectations. The majority of private equity investors are still pricing mid-20% to low-30% returns while roughly 15% indicated they would deploy capital for targeted returns of less than 20%, it reports.

However, the survey also finds that more than half of respondents who are delaying planned exits intend to do so for at least one year, largely due to the unfavourable valuation climate for sellers. During this time, 42% of respondents say improving operational performance will be their primary objective, it reports.

“Overall, the outlook for the upcoming year is optimistic,” it reports, as 81% of respondents expect valuation gaps between buyers and sellers to narrow in 2010, with 45% estimating in the first half of the year and 37% estimating in the second half.

“A vast majority of those surveyed indicated that they expect increased regulatory scrutiny over future transactions while many others expect certain sectors to continue receiving some form of economic incentive to drive transaction activity,” it notes.

In terms of industry-specific predictions, the large majority of respondents will not change their sector focus in the upcoming year. But of the respondents who do plan to change their sector focus, the consumer and technology industries are each cited by 67% of respondents as the industries they expect to gravitate towards in the coming months, it says.

IE