Institutional investors can afford to put up to 10% of their equity portfolio into private equity if they are prepared to take a long-term view, a new study* by Merrill Lynch Mercury Asset Management recommends.

The study comes at a time when pension fund investment in private equity is a subject of hot debate. The Government is shortly to announce the terms of reference of an inquiry into pension fund behaviour, which is being carried out by Paul Myners, chairman of Gartmore.