August 30, 2011 08:30 ET

SEI Survey: Investors' High Hopes for Private Equity Come With Higher Expectations for Managers

Institutions Demand More Manager Transparency and Communication as Fund Flows Increase

OAKS, PA--(Marketwire - Aug 30, 2011) - With sluggish returns projected for many asset classes, institutional investors are turning to private equity as a source of alpha but expect greater transparency, reporting and risk management from managers according to a global survey report released today by SEI (NASDAQ: SEIC) in collaboration with Greenwich Associates. The survey report, entitled "The Logic of Fund Flows," points to a need for private equity managers to demonstrate better reporting and risk-management measures to retain and gain assets among an increasingly demanding institutional investor base.

The survey, of more than 400 institutional investors, consultants, and fund managers, revealed that while more than a quarter of those surveyed (26 percent) plan to increase their private equity allocations over the next 12 months, investors and consultants differ on their investment objectives when it comes to private equity. More than two-thirds of investors (68 percent) point to return potential as their primary objective as opposed to 10 percent of consultants. Fifty percent of consultants, meanwhile, said diversification was their primary investment objective as opposed to only 18 percent of investors. "As investors are looking to achieve higher returns in an increasingly challenging return environment, private equity is coming back, but standards are higher across the board," said Rodger Smith, Managing Director at Greenwich Associates.

Beyond facing different priorities from different constituencies, the survey suggests that the criteria for evaluating managers have become more demanding. Respondents still point to the traditional three Ps of People, Investment Philosophy, and Investment Performance as the most important manager selection criteria, but the fourth P, Process, is becoming increasingly important. To that end, investors ranked portfolio transparency, fees, and quality of reporting and communications as very important factors in the selection process as well.

"Managers have reason to be encouraged by investors' renewed enthusiasm for private equity; however, in exchange, more is expected of them," said Ross Ellis, Vice President and Head of the SEI Knowledge Partnership for SEI's Investment Manager Services division. "Managers are facing greater performance pressure, greater fee pressure, and greater transparency expectations. They have to increase their operational effectiveness if they hope to meet the greater demand for value and compete in the 'Era of the Investor™'."

The survey also shows that investor expectations for private equity have been bolstered by a recent surge of successful exits. More than 300 exits worth an aggregate value of $120.1 billion were logged in the second quarter of 2011, far outpacing the previous record of $81.5 billion in the second quarter of 2010. Investors are also investing in a greater variety of private equity asset types as the sector matures. In fact, more than 80 percent of investors polled said they invested in venture capital, leveraged buyouts, growth capital, distressed investments, and mezzanine capital. The secondary market for private equity is also thriving as investors are buying or selling to meet liquidity demands or pick up deals at deeply discounted prices.

The survey report is the first in a three-part series published by the SEI Knowledge Partnership, which provides ongoing business intelligence to SEI's investment manager clients. To request a copy of the report, please visit

About SEI's Investment Manager Services Division
SEI's Investment Manager Services division provides comprehensive operational outsourcing solutions to support investment managers globally across a range of registered and unregistered fund structures, diverse investment strategies and jurisdictions. With expertise covering traditional and alternative investment vehicles, the division applies customized operating services, industry-leading technologies, and practical business and regulatory insights to each client's business objectives. SEI's resources enable clients to meet the demands of the marketplace and sharpen business strategies by focusing on their core competencies. The division has been recently recognized by HFMWeek as "Most Innovative Fund Administrator (Over $30bn AUA)" and "Best Funds of Hedge Funds Administrator (Over $30bn AUA)" in both the US and Europe. Additionally, SEI has been recognized as "Service Provider of the Year" by the Money Management Institute, among other industry awards. For more information, visit

About SEI
SEI (NASDAQ: SEIC) is a leading global provider of investment processing, fund processing, and investment management business outsourcing solutions that help corporations, financial institutions, financial advisors, and ultra-high-net-worth families create and manage wealth. As of June 30, 2011, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $430 billion in mutual fund and pooled assets or separately managed assets, including $180 billion in assets under management and $250 billion in client assets under administration. For more information, visit

About Greenwich Associates
Greenwich Associates provides research-based strategy management services for financial professionals. Greenwich Associates' studies provide benefits to the buyers and sellers of financial services in the form of benchmark information on best practices and market intelligence on overall trends. Based in Stamford, Connecticut, with additional offices in London, Toronto, Tokyo, and Singapore, the firm offers over 100 research-based consulting programs to more than 250 global financial services companies. For more information on Greenwich Associates, please visit

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