Investec’s research among senior UK private equity professionals for its private equity industry barometer reveals that the majority (57%) of GPs still expect the economic environment to improve.
This fall in market sentiment among GPs is most strongly reflected in their fund raising ambitions: under a third (31%) of GPs surveyed say that their firms’ next fund will be larger than the current one, compared with nearly a half (43%) last year. Of these, 70% say their next fund will be no more than 20% larger while last year 85% said their fund would be at least 20% bigger.
However, just 10% believe their next fund will be smaller with the majority (54%) predicting it will be about the same size.
Investec’s Barometer reveals that there are other signs of concern in the market. Over three quarters (77%) rate the current environment for raising a new fund as ‘very poor’ or ‘quite poor’ compared to 72% last year.
Simon Hamilton, Investec Fund Finance, said:
“While the majority of GPs remain optimistic about the UK economy’s growth prospects, the findings paint a very different picture from last year’s bullishness.
"Concerns around fund raising have become more acute and as conditions show little sign of improvement it’s likely that more firms will end up with funds that are either the same size or smaller than the current one.
“However, despite battling against tough economic headwinds the private equity industry continues to demonstrate resilience and tenacity; levels of optimism are significantly higher now than in 2009, when 11% of GPs predicted they would not raise another fund. This year the figure has more than halved to 5%.”
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.
