SUPPLIER AND TECHNOFIN®

UK private equity share nearly third of global total

Share of the UK private equity in the international market has increased three timed in last two years to nearly third of global total.

Faster growth in raising of private equity funds has resulted in the UK’s global share increasing from 10% in 2004 to 30% in 2006 according to IFSL’s report Private Equity 2007.

Around 85% of UK funds were raised to finance buyouts with nearly three-quarters of funds coming from overseas, mainly from pension funds and fund of funds.

The UK accounted for 14% of global investments in 2006, down from 21% in the previous year. At 2.2% of GDP, the UK has a higher ratio of investments and funds raised than any other country.

A record $365bn of private equity was invested globally in 2006, up nearly three times on the previous year. Private equity fund raising also surpassed prior years with $335bn, up a quarter on 2005.

Improved market confidence and trading conditions and strong performance along with stable long-term returns have contributed to the pick-up in activity in 2006.

Financing of buyouts was the biggest growth area globally as indicated by its share of investments growing from 21% in 2000 to 83% in 2006.

The 2006 regional breakdown of private equity activity shows that North America accounted for 60% of global private equity investments and 47% of funds raised although its market share has fallen since 2000.

Between 2000 and 2006, Europe’s share of activity increased particularly funds raised which jumped from 21% to 44%. Asia-Pacific region share of investments from 6% to 14% during this period.

Global private equity
$bn	2000	2001	2002	2003	2004	2005	2006
Investments	192	103	86	115	110	136	365
Funds raised	262	177	93	88	133	272	335
Of which managed in the UK
- Investments	12	6	10	15	26	30	51
- Funds raised	16	20	14	17	14	54	99
Sources: IFSL estimates based on EVCA/Thomson Financial/PwC, Aper, Private Equity Intelligence, NVCA, Dealogic data

Global private equity

According to IFSL estimates, a record $365bn of private equity was invested globally in 2006 up nearly three times on the previous year. Private equity fund raising also surpassed prior years in 2006 and totalled $335bn, up a quarter on 2005.

Improved market confidence and trading conditions and strong performance along with stable long-term returns have contributed to this growth.

Buyouts have accounted for a growing portion of private equity investments by value in recent years, and increased their share of investments from a fifth to more than four-fifths between 2000 and 2006.

By contrast, the share of early stage or venture capital investment has declined during this period.

Along with the increase in the size of the global private equity industry, there has been a move towards greater transparency and disclosure and more formal corporate governance structures.

This is particularly evident in Europe where the British Venture Capital Association (BVCA) is commissioning a review of the private equity industry with the intention of establishing a voluntary code or set of guidelines to encourage greater transparency and disclosure.

Individual groups are beginning to take actions ranging from strengthening their corporate governance structures through to adopting ‘fair value’ accounting for portfolio companies.

Geographic breakdown

The regional breakdown of private equity activity shows that in 2006, North America accounted for around 60% of global private equity investments (down from 67% in 2000) and 47% of funds raised (down from 69%) .

Between 2000 and 2006, Europe increased its share of investments (from 21% to 24%) and funds raised (from 21% to 44%). This was largely a result of strong buyout market activity in Europe.

In recent years, there has been a rise in the importance of Asia-Pacific and emerging markets as investment destinations, particularly China, Singapore, South Korea and India.

Asia-Pacific’s share of investments increased from 6% to 14% during this period while its share of funds raised remained unchanged at around 8%.

Entry Filed under: SUPPLIER AND TECHNOFIN®, Fund Administration, Fund Management, Private Wealth Management, Securities