EUROPE – Pension funds significantly decreased their investments in the European private equity industry in 2002, according to the European Private Equity and Venture Capital Association (EVCA).

In 2002 just 4.3 billion euros in capital was raised from pension funds – around 16.3% of the total – compared to 10.2 billion euros in 2001 – 26.8% of the total. Pension funds, as the prominent source of private equity capital, have now been taken over by banks, which in 2002 raised 26.3% of the total. Insurance companies, funds of funds and government agencies also increased their investments.

As a whole, investment in the European private equity and venture capital market increased in 2002. 27.6 billion euros were invested – an increase of 14% on 2001. In terms of amount invested, the highest volumes were seen in the UK, followed by France, Italy and Germany. Italy overtook Germany in 2002 for third highest investment activity.

Buyout deals dominated the final total investment figures. Investment was up for the entire private equity and venture capital market by 14% in 2002 to 27.6 billion euros; 16.9 billion euros were invested in buyout stage deal, comprising 61.2% of total investment. Says the EVCA: ‘The widespread sell-off of non-core corporate assets gave private equity practitioners ample scope to employ the buyout funds they had raised over the past few years.”

The amount invested in venture capital deals decreased, principally due to less venture stage opportunities. 9.8 billion euros in funds were invested in venture capital stage deals compared to 12,2 billion euros in 2001, and average early stage deal size was 0.73 million euros compared to 0.93 million euros in 2001.

Consumer-related sectors attracted the highest proportion of total European private equity investment, followed by industrial products and services, communications, other services, medical/health-related, and other manufacturing.

While investment rose, however, the data shows rate of fundraising to have fallen. Only 27.5 billion euros were raised in 2002, compared to 40 billion euros in 2001.

EVCA’s annual survey is carried out by PricewaterhouseCoopers, and interviews around 1,500 companies in 28 countries.