With the eurozone on the brink of potentially losing a member state as a result of the banking and debt crisis in Greece, there could be very uncertain times ahead for Greece-based private equity investors. The new capital controls recently put in place preventing the flow of euros out of Greece could inevitably put any foreign investments in the pipeline for Greece-based private equity investors on hold (at least until the free-flow of capital out of Greece is reinstated). With Greece in danger of falling out of the eurozone, this blog will compare private equity investors in the eurozone with Europe-based investors operating outside the single currency. Preqin’s Investor Intelligence currently tracks 698 investors within the eurozone that are actively investing in private equity, with 828 non-eurozone investors based in Europe that are also active in the asset class. Six of these active investors are based in Greece; Preqin also tracks 51 private equity investors that have previously invested in funds targeting Greece.
The chart above shows that the majority of eurozone investors with a preference for investing in private equity are based in Germany (159), accounting for nearly a quarter of all investors. The largest three representatives are all based in Western Europe and account for 55% of all eurozone-based investors, collectively holding €11.9tn in assets under management. Given the eurozone’s diversity in terms of economic stability, sophisticated markets and general state of development, we can see that the majority of capital available to private equity firms and funds still originates from the more developed countries in the West. In contrast, Greece, the Baltic States, Cyprus and Malta collectively account for just 3% of eurozone private equity investors.
When looking at the eurozone-based investors by type, private sector pension funds make up the single largest group, with 102 of these investors active in private equity. Despite insurance companies and banks being under strict financial regulations, such as Solvency II and Basel III, which limit investment in alternative assets, these investor types still collectively account for 22% of all eurozone-based investors active in private equity, with collective assets under management of €8.8tn. Interestingly, there are many more banks as a proportion (10%) of private equity investors based in the eurozone than there are for Europe-based investors outside the eurozone (3%). Non-eurozone-based investors comprise a much larger proportion of public sector pension funds at 16% compared with just 5% within the currency union.
Even with the minimal size of Greece’s private equity market and investor base, the current crisis could affect investor sentiment towards the region while there remains so much uncertainty. Until the crisis comes to a conclusion, confidence in the eurozone will remain a key factor in ensuring the ongoing economic recovery of the region, with all eyes focused on the actions of the troika in the coming days and weeks.