News & Analysis

Investors ambivalent on opinion of PE

Despite believing private equity is good for the economy, investors have a less than favorable opinion of fund managers themselves, recent research reveals.

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Private equity fund managers are less popular than lawyers and insurance professionals, according to a survey from research firm Gracechurch Consulting.

Nonetheless there was strong agreement from investors that the private equity industry positively contributes to the economy. And that private equity owned portfolio companies “exhibit a greater degree of operational improvement than public companies.”

Perhaps surprisingly, the survey also discovered that investors don't believe best practice principles put forth by the Institutional Limited Partner Association have made much difference to their GP selection process. 

In the last two years, there has been a decline in ratings given by respondents for the caliber of partners and portfolio managers within private equity

Gracechurch interviewed 300 private equity investors to ask them their opinions about various private equity shops, as well as other industries. Each investor was asked to name four private equity firms and provide their opinion along a sliding scale ranging from “poor” to “excellent”. Investors identified a total of 21 different GPs during the interviews, according to a Gracechurch spokesperson. 

Firms that received negative opinions include 3i, Kohlberg Kravis Roberts, Permira and TPG. Firms that received generally favorable opinions include Hellman & Friedman, Advent and Berkshire Partners. The survey did not provide any context around respondents' opinions. 

Recently the private equity industry's public perception and market reputation has been at notable risk. During Mitt Romney's failed presidential run, political opponents used his time at Bain Capital to paint the industry as “vulture capitalism”. The risk for GPs was that public pensions and other LPs beholden to political pressures may shy away from private equity investing if it would cause controversy. 

“In the last two years, there has been a decline in ratings given by respondents for the caliber of partners and portfolio managers within private equity,” said in a statement Gracechurch chief executive Ben Bolton. “The key issues driving this negativity center on the perceived lack of integrity around the deal process and a lack of alignment around the objectives of the deal.”