Analysis of European Union Fund Managers in the Run Up to Political Reshuffles - March 2014

by Matthew Morris

  • 06 Mar 2014
  • PE

The European Union is set to undergo an important year of change in 2014, with European Parliament elections, the selection of a new President of the European Council, as well as the appointment of a new European Commission taking place this year. The last five years have been a particularly active period for the EU, following on from the financial crisis and the attempt to deal with a subsequent sluggish rate of recovery. New and amended regulation has affected many, including those in the private equity sector. A high profile example is the Alternative Investment Fund Managers Directive (AIFMD), which aims to keep check on those fund managers that are based, or are controlling funds, within the European Union. Furthermore, it has been suggested that almost half of all currently serving MEPs may not return to their Brussels jobs after the elections in May, as they shift away from the political centre ground. This may prove to be a headache for many hoping for efficient implementation of regulation and delays are expected. Further regulation affecting the private equity industry that may be stalled by this political reshuffle includes the Solvency II proposal. The date this directive becomes effective has already been pushed back several times to date, forcing GPs to stay alert to its developments. 

According to Preqin’s Fund Manager Profiles online service, there are currently 1,644 private equity or venture capital firms that are located within the 27 member states that make up the EU. Over the last 10 years these firms have collectively managed to garner just over €467bn in committed capital and today have approximately €123bn remaining in estimated dry powder to invest from previously raised funds. For 614 of these firms their main strategy is buyout, whereas venture capital-focused firms account for 950 of the overall total. Of the firms based within the EU, the largest in terms of capital raised in the last 10 years is UK-based CVC Capital Partners, which has managed to collect just over €37bn in capital commitments, and currently holds over €19bn in estimated dry powder. The largest firm outside of the UK is Ardian; the French firm has secured just over €22bn in third party capital over the last 10 years and is estimated to have €8bn left in dry powder yet to be invested.  

Changes to the EU's composition and regulation will not only affect fund managers based in the region, but will also likely have some impact on those GPs that have an interest in investing within the economic union. Preqin’s Fund Manager online service shows there are currently 1,566 firms in total that have some investment focus on at least one member state of the EU. Of these, the majority (1,374) are based in the EU, but a notable 192 are located in external regions. In particular, there are 112 fund managers headquartered in the US, which, in the last decade, have raised an aggregate €389bn in capital commitments. The largest of these US-based firms, Kohlberg Kravis Roberts,, targets European investments primarily in the UK, Germany, France and Denmark, as part of its wider geographical focus.

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