Fear of Trump presidency outweighs Brexit for US LPs

A PEI survey of the global private equity community found that US-based investors are largely unaffected by Brexit in their outlook for the asset class in comparison to those in the UK and the rest of the world.

The US private equity community is largely unaffected by the UK’s 23 June vote to leave the European Union, according to a survey of 332 respondents recently conducted by Private Equity International.

US limited partners are less concerned about the impact of Brexit than investors in the UK and the rest of the world, while a majority of surveyed US fund managers hasn't seen a slowdown in investment activity, the survey found.

Only about a quarter, or 28 percent, of the 94 US-based respondents said they think Brexit will negatively impact their business, compared with 53 percent of UK-based and more than 40 percent of all respondents saying so.

To the US community, the potential election of Donald Trump as president was the biggest fear, followed by terrorism, while Brexit came in third place. Globally, however, Brexit was the largest concern, with Donald Trump in second place and negative interest rates in a very close third place.

Not a single US-based LP said it will decrease its allocation to alternative investments due to Brexit, whereas 8 percent of UK LPs said so, according to the survey. Three-quarters of American investors said their allocation will not change at all, compared with more than half, or 54 percent, of global LPs who said the same.

A quarter of surveyed US-based LPs said they will decrease their commitments to UK-focused funds, and another quarter said they’ll continue committing to them. Flocking away from the UK-focused funds was more pronounced in the UK, where almost 60 percent of investors said they’re planning to decrease their commitments there.

Meanwhile, no US investor said it is considering selling stakes in UK-focused and Europe-focused funds as a result of Brexit, compared with 12 percent and 6 percent of global LPs who are thinking about it, respectively.

When it comes to general partners around the world, about 40 percent of fund managers said investment activity has slowed down due to Brexit, while 44 percent said it hasn’t changed. By comparison, US-based general partners seem less affected by Brexit. A majority of them, or 56 percent, said activity hasn’t changed, while 31 percent said it has been sluggish.