New FocusPoint Survey Finds Institutional Investors Prioritizing Technology with Private Market Allocations Driven by Covid-19 Business Disruptions
New York, NY, February 26 2021 – In its inaugural "Alternatives Asset Allocation Survey" FocusPoint Private Capital Group (“FocusPoint”), an independent capital raising and advisory firm specializing in private capital markets, found an overwhelming trend to allocating to technology with (52%) of investors planning to increase exposure to technology funds in the coming 12 months.
The survey contacted 75 Limited Partners during December 2020 and January 2021 and spoke one-on-one with 68 LPs in the US and Canada about how COVID-19 could influence their investment strategies in the private capital market in the coming year. These investors included Insurance Companies, State and Local Government Public Pensions, Private Pension Funds, Endowments, and Asset Managers. This pool of investors represents $4.78 Trillion in total assets under management.
“As our survey indicates, we saw a notable shift in how limited partners are looking at their portfolios and what was clear was that if you haven’t been allocating or looking at each sector with a technology lens you most likely are being left behind,” said David Conrod, Chief Executive, FocusPoint Private Capital Group. “While some LPs are increasing allocations to technology as they have been underweight in 2020, many are increasing commitments as they believe it is something they cannot avoid,” he added. “Also, our fund clients two to three years ago probably did not have the levels of technology exposure, though after last year there is a technology element in almost everything we're involved with given the disruption of the health crisis and companies moving to more asset light, technology-focused business structures.”
Of the LPs nearly half (49%) currently allocated to technology via private equity funds, roughly (30%) said they were likely to increase allocations to sector specialists in the next year. A smaller number (15%) plan on increasing allocations to generalist funds and only (3%) to technology-focused funds.
"While we do see LPs committing to certain GPs, we found in talking to investors that in the area of technology there is a specific desire, due to the level of complexity in technology, that the manager be ‘best of breed’ and allocations are being filled based more on the conviction to a certain manager rather than filling a bucket,” Conrod added.
Conrod added, “Separately, we also spent significant time with a number of European family offices. One takeaway is that it was quite apparent many of these investors are lagging their North American family office counterparts as it relates to tech exposure. These experienced investors are actively seeking to increase their exposure to tech, including opening offices in the U.S.”
In the wide-ranging survey on investor allocation trends for 2021 other key findings included:
• The majority of investors (69%) had no strong preference of control versus minority, though they care more about how compelling and differentiated a strategy is and were more concerned with performance.
• Co-investment remains important to many LPs and (53%) said the ability to coinvest alongside a firm determined whether they would invest with a manager.
• Most investors are opportunistic and have no strong inclination for sector or generalist managers with over half (55%) saying they had no preference when allocating in the coming year but focused more on the qualities of the manager (track record, experience, execution). However, (27%) of LPs were more focused on sector specialists, when looking at buyouts, technology, and healthcare concentrated GPs.
• While (50%) of pension plans prefer managers sized over a $1 billion, (31%) of LPs have no preference above or below $1 billion. Managers in the $1 billion size range are also attractive both on the higher end of those specifically looking at lower middle market, as well as larger LPs who use a threshold of $1 billion as a loose benchmark to fit a commitment without breaking concentration limits.
For more findings from the survey please click here.
About FocusPoint Private Capital Group
FocusPoint Private Capital Group (https://www.fpcgllc.com/) was founded in 2010 by Guggenheim Partners veterans David Conrod and Robert Mortimer. Headquartered in New York City, the firm is an independent capital raising and advisory firm specializing in private capital markets and is a wholly owned affiliate of LANDC Investment LLC. The firm raises capital for private equity, credit, real estate, real assets and direct transactions in both developed and emerging markets.
FocusPoint operates as a FINRA regulated broker-dealer in the U.S. and is a member of SIPC.
Craig Allen, Managing Principal
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