EUROPE – European pension funds and insurers will provide the bulk of an extra 130 billion euros 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 130 billion euros in additional capital (global perspective) would flow into this asset class.”
Last week the European Venture Capital Association said 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 highlighted the impact of the shift away from pay-as-you-go pension systems on the asset class.
It said: “Pension funds in particular intend to have an above-average increase in their activities; this also driven by the changeover from pay-as-you-go to fully funded pension systems in many European companies.”
It 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.”