Private equity activity has picked up significantly as market conditions improve favourably for the asset class, according to consulting firm Towers Watson.

Research by Towers Watson found that private equity was emerging from the crisis and that market conditions were providing opportunities for private equity managers in selective areas of the market.

Mark Calnan, global head of private equity research at Towers Watson, said there was a flurry of deal activity in early 2010, which “is testament to the potential for transactions to be created for the right businesses if managers have the skill and capacity to aggressively seek new deals”.

He added that there were increasing opportunities in the small to mid-market buyout space and in emerging markets.

The report - Private Equity – emerging from the crisis - claimed that portfolio company operating performance was stabilising and pricing for new deals was becoming more compelling from a buyer's perspective.

Katharina Lichtner, head of research at global private equity asset manager at Capital Dynamics, told European Pensions that now was the right time for European pension funds to consider private equity in their investment portfolios.

“In many European countries, pension funds struggle to earn the returns they need to meet their long-term liabilities. This issue has been compounded by the financial market crisis and ongoing stock market volatility, as well as the low interest rate environment and recent turmoil in the real estate sector.

“Compared to traditional asset classes, European private equity has fared well, generating a 10-year annual net return of 5.2%. In comparison, the MSCI World TR returned 0.2% over the same period. Thus, private equity performance can contribute positively, particularly toward long-term liabilities.”

Lichtner added that she had noticed an increased demand for discussion and information about private equity by pension funds, particularly in regions that continue to have very low exposure to private equity, like Germany and Switzerland.

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