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Impact Investing

IPE special report May 2018

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European private equity inflows double, survey shows

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Total private equity fundraising for the European Union more than doubled from 2012 to 2013, reaching €53.5bn, and showing a significant recovery from years of lean between 2009 and 2012, according a report by the European Private Equity and Venture Capital Association (EVCA).

The change was driven by 12 large buyout funds, each raising more than €1bn, representing 66% of total fundraising, the EVCA said.

Pension funds contributed 37.2% of the 2013 total.

This compares with only 11 % from the insurance sector, largely due to legislative restrictions relating to capital adequacy.

Input from pensions fund managers showed a steady annual rise from 2009’s low point, of 14.6 % of the total.

Previously, the percentage had peaked at 33% of the €80.4bn of total new funds raised in 2008, before the effect of the crisis.

Another notable factor is that the private equity industry attracted significant levels of overseas capital into Europe.

The EVCA said this accounted for around half of the funds raised (€26.2bn).

The contribution from North American investors increased from 24% in 2012 to 36%.

Dörte Höppner, chief executive at the EVCA, said: “I am particularly pleased to witness foreign investors’ enthusiasm for European private equity – a sure sign the world’s largest trading bloc has regained its rightful place at the centre of the investment map.”

The overall picture for pension funds for 2013, when a significant force of US pensions funds were developing interest in the EU, was that they had gained confidence they could achieve reasonable returns, according to Cornelius Mueller, the EVCA’s head of research.

The development followed a period of uncertainty caused by the stability of the euro being doubt, he said.

“Now the EU has stabilised”, Mueller added, “it is not crazy for a pensions fund manager, with a 10-year time horizon, to invest in the EU.”

The largeness of the dominating single investments is due to the need to justify investigation costs, due diligence and so on, Mueller told IPE.

This is to enable a good match between opportunity and return on investment.

As for investment allocation by European private equity firms, this would be in the order of 27% in the UK, 18% in France and 14% in Germany.

On his assessment of this year’s investment activity, he expects to see a similar level to that of 2013.

Meanwhile, Mark Calnan of Towers Watson said the 2013 fundraising was “not a huge amount in terms of EU stock market, but the jump is a good start for European private equity.”

Calnan, who is global head of private equity at the consultancy, added that US fundraising itself has improved.

“It is not just an EU phenomenon,” he said.

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