Assets Under Management AUM

Rapid recovery from pandemic boosts private equity performance

A strong exit market since the peak of the pandemic last year has translated into high returns for hedge funds, according to Preqin’s annual industry report.

For private equity and venture capital funds that started investing in 2018, the median net internal rate of return is 22%.

Although analysts at Preqin cautioned that this was only an indicator of future performance, as the funds were only in the early years of investing, they also found that for vintages 2011 through 2017, IRRs increased by one to four percentage points, reaching between 14% and 19.4%.

This is due to the rapid recovery in equity markets and companies seeking acquisitions, which in turn has resulted in a vibrant exit market.

Best performing PE funds focused on Europe (2009-2018 vintages)

Rank Funds Old Fund size (mn) Type Net IRR (%)
1 Hg Mercury 2 2017 575 GBP Redemption 136.9
2 BioGeneration Ventures II 2012 23 euros Early stage 103.4
3 GMT Realization Fund 2017 149 euros Redemption 88.6
4 Mandarin Capital Partners Secondary 2015 88 euros Secondary 68.2
5 HVOF II (capital of the Netherlands) 2013 16 euros Redemption 67.0
6 Earlybird Digital East Fund I 2014 150 USD Early stage 61.0
7 Growth opportunities for early risers I 2009 5 euros Growth 60.7
8 4BIO Ventures I 2014 10 USD Capital risk 59.3
9 Cathay I Innovation Fund 2017 287 euros Capital risk 58.3
ten Nordic Capital Fund IX 2018 € 4,311 Redemption 57.0

Source: Préqin

In December 2020, managers of alternative asset funds based in Europe held 2.06 billion euros in assets under management, up 13% year on year. This is expected to continue to grow as investors seek to allocate more money to alternatives after the pandemic.

“The real assets will be the winning bet for a post-Covid world. In particular, a new post-Covid cycle could see a resurgence of inflation and continue to direct capital towards those asset classes that offer protection against inflation and the prospect of higher returns, ”said Dominique Carrel -Billiard, Global Head of Real Assets at Amundi. .

“Real assets can help meet the economic challenges posed by the recovery of Covid and meet investor expectations in terms of performance and impact, including helping to allocate capital towards the energy transition. As such, making real assets accessible to a wider range of savers is crucial. ‘

He added that private equity markets are expected to offer a possible risk premium of 230bp in the US and 200bp in Europe to listed stocks. Real estate and infrastructure, on the other hand, are expected to offer risk premiums of 390bp and 300bp respectively, relative to investment grade bonds.

“Such a large spread in expected returns should accelerate the flow of capital to real assets as investors seek to optimize their risk / return trade-off,” he said.

Alternatives is already on track to set a new fundraising record this year, with € 159 billion in capital raised in the first six months of the year by more than 500 funds based in Europe.

Private equity and venture capital accounted for half of it, Preqin found. The most important area of ​​growth was infrastructure, which accounted for 15% of total capital raised, up from 6% in 2011.

Mark O’Hare, Founder and CEO of Preqin, said: “We are poised to see European economies hit new records in 2021, optimistic that they are on the road to recovery from the pain of the pandemic. .

“Our discussions with European-focused investors confirm that they are ‘on board’ when it comes to their allocations to alternative assets: in the face of uncertainty and declining returns across all asset classes, l ‘The attraction of alternative assets, including innovative green investment opportunities, remains compelling.’

Europe’s largest private equity funds closed in 2020-H1 2021

Funds Solidify Headquarter Fund size Fund type
CVC Capital Partners Fund VIII HVAC UK € 21.3 billion Redemption
FAA VIII Ardian France $ 19 billion Secondary
EQT IX EQT Sweden € 15.6 billion Redemption
Apax X Apax Partners UK $ 11.7 billion Redemption
Pasting International Partners VIII Paste Capital UK $ 9 billion Secondary
Source: Préqin

Private market transactions also had a good start to the year, with € 236 billion in deals closed in the first six months of the year, already approaching the total of € 284 billion for the year. 2020.

The UK continues to be the largest alternative market, however, the share of assets managed by UK-based general partners increased from 59% to 52% between 2010 and 2020. There were already 85 billion euros in private capital transactions in the UK. equal to the total of 2020.

But France is catching up. The funds based in the country exceeded the 50 billion euros mark reached in 2020. At the end of 2020, private capital outstandings stood at 216 billion euros, up 19% over one year.

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