Over the past decade, the private equity market in Central and Eastern Europe has drawn a growing amount of interest from investors, culminating in a significant leap in fundraising in 2007, when 36 private equity funds with an exclusive focus on the region reached a final close, securing an aggregate €8.1 billion. However, fundraising in 2008 was less successful and saw a return to the aggregate commitment levels of 2005/6. So far this year, eight private equity funds with an exclusive focus on Central and Eastern Europe have reached a final close, raising €2 billion between them.
So what can be expected for CEE private equity fundraising in the future? At present, there are 50 private equity funds on the road with an exclusive focus on opportunities in CEE countries, seeking commitments totalling €9.3 billion. So far, 21 of these funds have held an interim close, securing an aggregate €1.9 billion in commitments. In our recent conversations with LPs that have previously shown an interest in investing in CEE focused private equity funds, we have sought to ascertain their views of the market following the financial downturn and their appetite for the region.
We asked investors whether their plans for investment in CEE focused funds had been affected by the financial downturn. Around two-thirds (65%) told us they had not adjusted their plans for investment in the region and a further 4% informed us they were focusing more on the region as a result of the current economic climate. However, 15% of investors that have previously shown an interest in CEE told us they anticipated making fewer commitments to private equity funds targeting the region than in past years and a further 15% were not intending to make any new commitments for the foreseeable future.
Over the longer term, the outlook for private equity managers seeking to raise fresh capital to invest in Central and Eastern Europe is reasonably positive. A third of LPs expect to increase their exposure to CEE over the next 3-5 years and an additional 56% intend to maintain their current level of exposure to the region. Just 11% told us they expected to decrease their exposure to CEE.
Further results of our research on investors and their attitudes to CEE private equity can be found in the November 2009 edition of our free monthly newsletter, Private Equity Spotlight. Please click here to sign up to receive this newsletter.