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Fundraising for European private equity surges 40% in first half

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Investors channelled €45.6bn into private equity and venture capital in Europe in the first six months of this year, with fundraising 40% higher than in the second half of last year.

Private equity industry association Invest Europe said this level of investment was the third-highest figure for a six-month period since 2007.

The data also showed that venture capital investment in European start-ups was more than €3bn between January and June 2018, which Invest Europe said was the highest half-year result since 2007.

Including this, the association said venture capital had now raised almost €11bn in new funding for start-ups in Europe since the beginning of last year.

Michael Collins, chief executive of Invest Europe, said: “Demand is high for European private equity and venture capital and it continues to thrive with healthy levels of fundraising and investment in the first half of the year.”

He cited a number of high-profile public offerings from European venture-backed start-ups in the last six months, including Spotify, Adyen and Farfetch.

Invest Europe said the investment levels came at a time when the European economy was seeing high growth rates and still benefiting from low interest rates.

Leverage buyouts struggle

However, separate research by software provider eFront has shown that other areas of private equity have struggled in recent months.

Average leveraged buyout (LBO) fund performance fell for three straight quarters from its 10-year high return multiple of 1.49 in 2017, the company said. In Q2 2018 this figure had fallen to 1.45 – although this was higher than its annualised average return multiple of 1.3 between 2009 and 2018.

“LBO funds have enjoyed almost a decade of increasing performance since the financial crisis, reaching an all-time high in the third quarter of 2017, with an all-time low risk in the preceding quarter,” eFront said.

“Following this peak, performance has drifted slightly lower… However, performance remains well above the level seen during the financial crisis.” 

US-based LBO funds performed above or in line with the long-term average, according to eFront’s analysis, with funds launched in 2009 and 2014 “looking to be particularly strong performers”. In contrast, funds based in western Europe experienced more volatile performance “most probably because of the euro crisis”, the company said.

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