Investec Fund Finance reports: Private Equity Partners Optimistic

08 March 2011

PRIVATE EQUITY PARTNERS OPTIMISTIC FOR OUTLOOK IN 2011

-       81% of GPs more optimistic than they were 18 months ago, says Investec

-       Almost half of GPs say next fund will be larger than current one

General Partners (‘GPs’) of private equity firms are marginally more optimistic about the economic outlook than they were 18 months ago, according to Investec Fund Finance (‘Investec’)(1).  Investec’s research among senior UK private equity professionals for its private equity industry barometer (‘Barometer’) reveals that 81% of GPs expect the economic environment to improve, compared to 79% of respondents in August 2009.

Almost half (43%) of GPs surveyed say that their firms’ next fund will be larger than the current one.  Of these, 85% say their next fund will be more than 20% bigger, with 16% expecting their next fund to be more than 40% larger.  Just 3% of GPs now say that their firm will not raise another fund compared to 11% in August 2009.

The proportion of GPs saying that their next fund will be smaller has doubled since 2009.  However, Investec says that indicates that there has been a shift from not raising a fund at all, to raising a smaller one. 

Simon Hamilton, Investec Fund Finance, said, “The UK private equity industry is in a relatively upbeat mood despite challenging and unpredictable market conditions.  There is also a general optimism about future fundraising both in terms of the number and size of funds but they do recognise this is a very challenging time to raise a fund.

“However, one trend that appears to be emerging is that there is a widening gap between high and low performing firms, with those able to raise more funds leaving the remainder behind”

Investec’s Barometer reveals that there are other signs of concern in the market.  Almost three quarters of GPs rate the current environment for raising a new fund as ‘very poor’ or ‘quite poor’ and none say that it is a ‘very good’ time to do so.  Likewise, nearly one in five (19%) of GPs believe the economy will decline over the next 12 months.

The Investec Fund Finance team focuses on the financing needs of leading private equity funds and the professionals behind them.  Investec offers a broad range of financing facilities tailored to the unique requirements of the private equity sector. Typically, the loan sizes are greater than £5 million and can extend to between £50 million and £100 million at the higher end. The loans are usually structured against the private equity investments, management company cash flows or investor commitments. 

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For further information please contact:

Investec Specialist Private Bank                                   020 7597 4866 / 4208

Simon Hamilton

Helen Park-Weir

Citigate Dewe Rogerson                                               020 7638 9571

Alistair Kellie

Georgiana Brunner