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Investors' main motivations will be to re-focus their resources on their best private equity managers (GPs) and to re-balance their portfolios for a post-Covid world. One third of Limited Partners will face liquidity shortfalls, which they plan to remedy through asset disposals and new credit facilities. GP-led secondaries are likely to play an important role, too. Well-structured GP-led processes are overwhelmingly popular with LPs - 85% of whom regard them as a useful tool.

"The secondary market played a vital role in private equity during and after the GFC," noted Jeremy Coller, Chief Investment Officer of Coller Capital, "and secondary capabilities have certainly evolved since then. If General Partners structure liquidity processes that offer genuine alignment to all parties - whether they're buyers or sellers - Limited Partners will welcome them, to the benefit of all participants in the asset class."

LP/GP communications and reporting

Despite the suddenness of the pandemic's onset, nearly all LPs declare themselves fairly or highly satisfied with how their GPs have communicated - a stark contrast to the Global Financial Crisis, after which 60% of investors told the Barometer that they were dissatisfied.

The virtual LP Meetings that sprang up everywhere last spring will remain a permanent feature of the landscape, investors think - but they will become a complement to, rather than a replacement for, face-to-face meetings. By contrast, most investors think private equity-related travel will simply never return to its pre-pandemic levels.

Investors' risk appetite

Two thirds of LPs believe one legacy of Covid-19 will be private equity investors starting to take more account of structural risks - and that factors such as pandemics, climate change, and geopolitics will henceforth play a more important role in investors' asset allocation and portfolio construction decisions.

However, despite continuing uncertainty about the pandemic's ultimate effects, Limited Partners overwhelmingly believe that the current private equity investment opportunities for GPs outweigh the risks - just one in ten LPs think GPs should pause or slow their investment pace until the Covid-19 crisis is resolved. And they see all areas of the world as ripe for investment - especially North America, which almost all investors say is currently attractive or very attractive for GP investment.

Changes to LPs' asset allocation and investment strategies

Investor enthusiasm for private equity and alternative assets remains strong overall, although some changes in asset allocation and investment strategy are inevitable in the wake of the pandemic. For example, LP appetite for real estate has dipped significantly since the coronavirus struck. At this time last year, a net balance of a quarter of LPs were planning to boost their target allocations to real estate. Today, the proportion of investors planning a lower asset allocation to real estate almost equals those planning an increase.

Many investors are also likely to re-think co-investments - over 40% of Limited Partners say changes in the investment environment are likely to lead to a reassessment of co-investment policies.

Increased attention to individual industry sectors is also on the cards: almost half (45%) of LPs say they will increase the sector focus of their private equity portfolios.

However, their approach to different sectors will vary. Investors will prefer buyout funds to venture growth funds in boosting exposure to online retail, telecommunications services, and online media/entertainment. By contrast, almost four times as many investors plan to boost exposure to biotech and drug discovery via venture/growth strategies than via buyout strategies only.

One investment opportunity much discussed recently will not tempt most investors. Only 7% of LPs say they are likely to commit to a sports-focused PE fund in the next few years.

Turnaround and distressed investments

Unsurprisingly, LP appetite for turnaround and distressed strategies has grown - almost a third (29%) of investors are planning to increase their exposure to these strategies in the next few years (compared with one in five LPs in the Barometer of Winter 2018-19).

Roughly seven out of ten LPs expect to achieve annual net returns of more than 11% for the current vintage of distressed debt funds (and 17% of LPs are forecasting net returns of at least 16%).

Investors are sanguine about private debt funds overall, seeing higher default rates because of the pandemic as a largely manageable problem. Only 10% of LPs believe higher defaults will be a major problem for North American debt funds - though this figure rises to 22% of investors in the case of Asia-Pacific debt funds.

Private equity and the public equity markets

Over three-quarters of LPs believe that the number of public companies taken private by private equity is likely to increase further in the next couple of years.

However, the attractions of SPACS (Special Purpose Acquisition Companies) as an investment strategy are less obvious to Limited Partners. Over 70% of LPs think private equity offers a better risk/return profile than SPACs - and fully 86% of Limited Partners say they have not invested in a SPAC and have no intention of doing so. Indeed, two thirds of investors regard SPACs as a largely cyclical phenomenon.

Diversity in the private equity industry

Although diversity in the private equity industry has been discussed for some time, ethnic diversity had until recently received less attention than gender diversity. Investors believe, however, that the industry's recent focus on ethnic diversity is likely to bear fruit - almost two thirds of LPs say that today's increased focus on the issue will lead to faster change on the ground.