What's the interest of US Limited Partners in Europe?

What are the current major trends and challenges in the private equity market for US Limited Partners? What's their interest in Europe? Read about insights from our expert panellist Kate M. Carlson, CFA, Managing Director with Franklin Park.

What is your company allocation to alternative investments and private equity in general and specifically to the European market? 

Kate: Franklin Park is exclusively focused on private equity, debt and related co-investments.  Our clients’ allocation to the private asset class generally ranges from 10% to upwards of 30%.  We currently represent all U.S. investors so, given the added currency risk, we typically recommend each client cap exposure to international opportunities at 10% annually.  That is non-U.S. broadly, although our primary deployment is in Europe and Asia.  We don’t necessarily consider non-U.S. opportunities for diversification but are seeking additional portfolio return.

How you invest in PE: what approach to investing in private equity does your company have, what private equity strategy is the most popular in your company and why?

Kate: Private equity should be additive to a client’s overall portfolio and compensate for its illiquidity.  As a result, we tend to be focused on higher return strategies such as small/lower middle market buyout and turnaround.

What are the current major trends and challenges in the private equity market that impact Limited Partners allocation?

Kate: Given the lack of return in other asset classes, such as fixed income, there is no shortage of capital in private equity currently, creating allocation challenges.  Fundraising timelines for the best managers continue to expedite and LPs need to be able to move quickly.    Further, we’ve been on a strong market run since the great financial crisis of 2008, with more of a brief pause rather than any significant impact from the pandemic.  Given that, many groups are exhibiting attractive returns, and it has become more difficult and crucial to differentiate manager skill from luck/timing.

What industries are currently more attractive to private equity investment in Europe?

In general, we are starting to see some of the sector specialization in European private equity managers that has been prevalent in the U.S., which we think is a merit.  Technology in particular has seen a number of dedicated groups emerge, and the sector seems to present a compelling valuation opportunity in Europe relative to the U.S. 

About authors:

Kate M. Carlson, CFA, is a Managing Director with Franklin Park, where she is responsible for the analysis and evaluation of private equity investment opportunities, client relationship management, and conducting industry research. Prior to joining Franklin Park in 2007, Kate was with GMAC Mortgage and Standard and Poor’s Corporate Value Consulting, formerly a U.S. PricewaterhouseCoopers business. Kate is a CFA Charterholder and a member of the CFA Institute. She received a B.S. in Finance with honors from Villanova University.

Want more insights?

Join our upcoming Private Equity and Venture Capital conference 0100 Virtual Europe this November. Kate speaks at "US LPs - What's their interest in Europe?" panel discussion on the 4th of November at 4 pm (CET). Learn more.

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