Data room: Private equity industry shrugs off Brexit vote

The UK formally started the process of exiting the EU at the end of March, triggering Article 50 of the Lisbon Treaty and firing the starting gun on a two-year period of exit negotiations.

A glance at private equity fundraising data shows that the nine months since the referendum has been encouraging for those raising UK-focused private equity capital. Between June 2016, the month of the vote, and March 2017, £6.7 billion ($8.3 billion; €7.7 billion) was raised for sterling-denominated funds, according to PEI data. This was almost twice as much as the £3.6 billion that was raised in the corresponding time period in the previous year.

Among the firms to raise capital since the referendum are HgCapital, which collected more than £3 billion across two separate funds; Mayfair Equity Partners, which brought in £400 million for its debut fund; and Livingbridge, which raised its largest fund ever at £660 million.

“During fundraising last year we did have some nervous investors ahead of the first close in July,” said one London-based general partner in response to a survey by Private Equity International, “but all expected investors came in for the final close of the fund.”

More than half of UK-based general partners surveyed said the vote had not affected fundraising, and none said it sped up their marketing efforts, suggesting LP appetite for UK-focused funds has remained buoyant in the nine months since the vote.

While fundraising appears not to have been adversely affected by the referendum, the UK's departure from the EU could hit it in the longer term. It is unclear whether the two-year negotiation period will result in UK-based firms having access to EU markets through the passporting regime. 

InvestEurope, the industry body for the European private equity industry, warns that managers should brace themselves for a 'hard' Brexit. “The Brexit negotiations will be unprecedented in their complexity and even if all the issues cannot be settled in two years, an extension of the talks or a transitional deal is far from guaranteed,” says chief executive Michael Collins. “We advise all our members to consider the consequences for their activities of a UK exit from the EU in March 2019 without a deal on the future relationship.”