Canada-based investors are somewhat under invested in private equity, and are expected to serve as an important source of new funds in the year ahead, says global research firm Preqin in a new report.
The firm reports that Canadian limited partners (LPs) manage aggregate assets of over $5.1 trillion, and on average, look to allocate a larger proportion of their total assets to private equity compared to the United States. The average target allocation to private equity of Canada-based LPs is 13% of total assets, it says. However, it reports that current allocations are below that target at 11.9% currently.
By comparison, investors in the U.S. have average current and target allocations to the asset class of 11.3% and 11.6%, respectively. With Canadian LPs on average under allocated to the asset class, “they are likely to be an important source of capital for managers on the road in 2013,” Preqin suggests.
The firm also notes that 60% of Canadian investors in private equity have either invested in, or expressed a preference for investing in venture capital vehicles, with 47% having a preference for buyout vehicles.
By location, over three quarters of Canada-based LPs (77%) have either invested in, or have expressed a preference for investing in, North America, it says. Yet, despite this strong preference for domestic funds, a significant number of LPs in Canada are open to allocating capital to vehicles targeting Europe (50%) and emerging markets (35%), it adds.
Additionally, it reports that public sector pension funds account for almost a third (29%) of LPs investing in private equity in Canada. Whereas in the U.S., only 12% of private equity investors are public pension funds. Private pension funds account for the second highest proportion of Canadian investors in the asset class (17%), followed by foundations and multi-family offices, which each make up 8% of the total.