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LPs increasingly concerned by tax and regulatory changes

by Alice Murray 14 June 2021

According to Coller Capital’s latest Global Private Equity Barometer (Summer 2021), LP respondents said the risks to PE returns from regulatory change and tax rises have increased significantly in the last 18 months. 

Coller’s last Barometer (Winter 2019/2020) found that 43% of LPs identified regulatory changes as the greatest risk to PE returns. The latest survey found that 70% of LPs believe this is the biggest risk. 

Similarly, the last survey found 32% of LPs were most concerned about tax changes, which has risen to 63%. 

The greatest risk to PE returns according to LPs, however, continues to be geopolitical, with 69% most concerned about that last year, rising to 77% this year. 


According to the survey, half of LP respondents believe a robust ESG policy will boost PE returns. 47% of LPs believe that adopting a robust ESG policy will improve an LP’s long-term private equity returns. This proportion did not vary significantly by LP location. Only 1 in 10 LPs thinks that adopting a strong ESG policy would lead to a reduction in returns.

Just over half of LPs based in Europe and the Asia-Pacific region believe that some performance-related elements of LP remuneration should in principle be linked to the attainment of ESG goals. Fewer North American LPs agree, with only 32% believing there should be a link.

Allocations and re-ups

Selecting GPs and funds is now harder than usual, many LPs said. Although this has generally been seen as a good time to be making new PE commitments, it hasn't been easy, according to many investors. North American LPs, in particular, said this is a difficult time to be choosing PE managers and funds.

Specifically, 57% of North American LPs said it is difficult to select GPs, while 5% found it easy. 32% of European LPs found it difficult, while 27% found it easy. And 39% of Asia-Pacific LPs found it difficult, while 4% found it easy. 

Two in five limited partners said they are now more likely to refuse an investment in their portfolio GPs’ latest funds than they have been in recent years. Among North American investors, the proportion rose to almost half.

Unexpectedly weak performance by individual GPs was cited as the most important reason for LPs refusing re-ups, with 82% of LP respondents citing this reason. 

Other reasons for refusing re-ups included: to rebalance portfolios by investment stage/strategy (33%); liquidity constraints (28%); to slow their rate of PE commitments (25%); to rebalance portfolios by industry sector (19%); to rebalance portfolios by geography (14%).

The majority (58%) of LPs have continued to build new GP relationships at the same rate as before the pandemic.


Coller Capital’s 34th Barometer canvassed the opinions of 111 private equity LPs; 40% from North America, 39% from Europe and 21% from Asia Pacific. 

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