While volatility and crisis are at the forefront of economic news these days, speakers at the British Private Equity and Venture Capital Association's annual summit identified some bright spots, including in venture investments and emerging markets.
Michael Queen, chief executive of UK-listed alternatives manager 3i Group, said emerging markets offered great promise for European firms.
Sonali de Rycker, a partner at venture capital group Accel Partners, pointed to the technology sector, citing growth statistics from some of the most successful internet ventures in recent years. She argued that the technology sector followed a 14 year cycle. “We are in the middle of the social and mobile internet trend cycle,” she said.
This cycle has seen the likes of Facebook and Twitter become everyday communication tools, and the popularity of social media websites was growing at an increasing rate. She said that when Yahoo was launched, it took 60 months to reach 25 million users landmark. When Google+ was launched in August this year, it took less than one month to reach that many subscribers.
De Rycker reassured delegates that “Europe’s serial entrepreneur phenomenon is a reality.”
Offering an LP perspective on the current market, HarbourVest managing director Peter Wilson said Europe remained a powerful market in its ability to deliver returns to investors, and offered evidence of how GPs were adapting to the difficult fundraising environment.
Wilson stressed the need for European GPs to remain competitive in the fundraising market by offering more concessions in an increasingly LP-focused market.
“Firms are offering transaction fee offsets and many firms are offering downside protection through whole-fund carry structures rather than deal-by-deal, vesting arrangements and concessions on fees,” he said.
Wilson also revealed gross return figures based on managers’ performance since 1985, first by country, and then by sector. On a country basis, Germany had delivered 3.3x gross returns in that period, ahead of France (2.7x), Benelux and Spain (2.5x), and the Nordic region (2.2x). On a sector basis, the healthcare sector had delivered the best returns with 3.2x gross, ahead of financial services (3.0x) and industrials (2.6x).
He also noted how fundraising had plunged since 2009. Between 2000 and 2004, the private equity industry raised an average annual amount of $138 billion, increasing to $368 billion between 2005 and 2008, and then falling again to $138 billion since 2009.
Allocations to Asia-focused funds were increasing, he said, with those to US funds relatively unchanged, and European funds taking the biggest hit.