Institutional investors remain committed to private equity investing, but they demand more openness about what such funds hold in their portfolios and expect higher standards of reporting over performance and liquidity, according to a survey report released today by SEI.

SEI asserts that private equity managers who standardize and institutionalize transparency practices will be most likely to retain and capture assets because these managers will be more efficient.

Returns from private equity have suffered as availability of credit – a key ingredient for leveraged buyouts – dried up in the early phase of the credit crunch. Ironically, however, some analysts argue that a recession is a good time for private equity transactions to start, as valuations of firms are often cheap.

The survey, which was completed by senior investment professionals at 51 organizations ranging in size from less than $500 million to more than $20 billion in assets, revealed that more than 90 per cent of institutions polled planned to either increase or maintain their allocations to private equity in the coming year.

The majority of survey respondents see private equity as a viable source for potential return (73 per cent) or as source for diversification (69 per cent) despite the fact that private equity activity has remained sluggish this year, while the public markets have rallied sharply. Most participating organizations were foundations, endowments, or public pension funds.

"Private equity fundraising has stalled for the past 18 months, but the good news for managers is that institutions remain firmly committed to the asset class," said Phil Masterson, managing director for SEI's Investment Manager Services division.

Not surprisingly, in the wake of the recent global financial crisis, liquidity risk was cited as a primary concern by the majority of investors (62 per cent) followed by poor performance, both absolute and relative (58 per cent).