Institutional investors expect private-equity firms to struggle to sell assets in Europe as the continent navigates through the sovereign debt crisis, according to an industry survey.
In Europe, most investors see “a stagnant or deteriorating” economic climate, London-based Coller Capital Ltd., which buys commitments in funds that banks and other investors are seeking to sell, said in a statement today. This differs from North America, where almost all investors, also called limited partners, expect to see a slow economic recovery over the next 12 to 18 months, according to the firm, which surveyed 101 investors.
“There’s a recognition among investors that Europe is diverging from North America,” Stephen Ziff, a partner at Coller, said. “It comes as no surprise as Europe has yet to solve the euro-debt crisis.”
Private-equity firms have led about $72 billion of acquisitions in Europe this year, down from $116 billion in the same period last year, according to data compiled by Bloomberg. There were about $364 billion of transactions at the peak of the buyout boom in 2007. Buyout firms pool money from investors, including pension plans and endowments, with a mandate to spend it within five to six years and return it with a profit after about 10 years.
While investors are “optimistic” about fund managers’ ability to sell assets in North America, 43 percent expect a deterioration of Europe’s exit environment, Coller said.
The European venture capital industry, in particular, is suffering. Investors in European venture funds have made a median return of 5 percent or less a year, and more than a third of them have lost money, according to the survey. Three-quarters of investors said the sector won’t recover without “significant government support through an improved regulatory and tax environment,” Coller said.
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