European pension funds and insurers will provide the bulk of an extra E130bn of capital that will flow into private equity, a new report says.
“The institutional investors in Europe that we surveyed intend to increase their share of private equity investments from the current average of 1.1% to 3.2% of total assets over a five-year period,” said management consulting firm Mackewicz & Partner.
“This would mean that a good E130bn additional capital (global perspective) would flow into this asset class.”
The European Venture Capital Association said recently the European directive on occupational pensions would provide a boost to the venture capital and private equity industry.
The Mackewicz report added: “The additional capital freed up for private equity investments will come predominantly from European pension funds and insurance companies.”
It saw above-average allocation growth from institutions in the UK, the Netherlands and France. European pension funds currently allocate 1.7% to private equity, it found.
The report compared the US and European systems, saying that in the US around 50% of private equity investments stem from pension funds, compared to 23% in Europe. “From the these investment ratios, it is possible to derive just how high the long-term potential is for both listed and private equity companies to raise capital in Germany and continental Europe.”